Car Insurance and Auto Accidents - Are You Covered?
UPDATED: July 21, 2020
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The least you should know...
- Not only will you need car insurance for any auto accident you may be involved in, but you'll also be required to carry auto insurance to drive in most states.
- Liability insurance covers the damage you cause if the accident is your fault.
- Collision insurance pays for repairs to your vehicle regardless of fault.
- Comprehensive coverage only applies to damage to your car when it's not in operation.
There are endless options when it comes to purchasing auto insurance. While insurance requirements vary from state to state, it is fair to say that in every area there are various levels of coverage available.
Most states have laws outlining minimum amounts of insurance every driver must carry, but it is important to note that while minimum coverage may satisfy the letter of the law, it may not offer the degree of protection you need should you be involved in a serious bodily injury accident.
If your state requires insurance, it is liability insurance. This only covers the damage to the other driver if the accident is your fault. Collision insurance covers damage to your car when you're behind the wheel — like if you hit a tree or if the other driver is underinsured and the wreck is their fault. Comprehensive covers damage when you're not around (such as hail damage). There are many other types of additional coverage, too.
So what is car insurance and why should you buy it? Beyond the legal requirements, car insurance can ensure that if you are injured or your property is damaged you are able to fully recover.
If you are having a dispute with your insurer as a result of an accident and need to consult an attorney, you can put your ZIP code into our search tool to find an experienced insurance lawyer in your area.
Liability Insurance — The Basics
As a matter of law, nearly every state requires motorists to carry some degree of liability insurance. States have determined that it is in the public interest to require insurance that will cover property damage and expenses related to personal injuries sustained by others if you cause an accident.
Each policy carries its own set of limits, usually subject to state statutory minimum amounts. Often, the insurance coverage you purchase will provide for legal representation in the event you are sued, which could save you thousands of dollars.
Another section of your policy will likely refer to bodily injury coverage, which will be used to pay for medical and other related expenses.
Property damage coverage will cover expenses related to the repair or replacement of vehicles, or any other property damage (See Collision, below). Policies will also include coverage that pays for lost wages. Nearly every state requires motorists to carry at least a minimum amount of liability insurance. For more information, refer to your state’s insurance department.
Damage to Your Vehicle? Enter Collision Insurance
Irrespective of who is at fault in a car accident, collision coverage will more often than not cover any damage to your vehicle, once you pay a contractual deductible.
Normally, your own insurance company will analyze the damage to your vehicle and decide whether to pay for repairs or deem the damage a “total loss,” meaning that instead of embarking upon extensive and expensive repairs, the insurance company will pay you the total value of your vehicle and scrap the damaged car.
In some states, you can also file a claim with the insurance company of the other party or parties involved in the accident, and seek reimbursement from them. This usually requires you to file a claim with their insurance company, which may have the added benefit of bypassing your deductible.
In the case of a total loss, it is important to note that you will likely receive the actual cash value (ACV) of your vehicle, as opposed to what you owe on or paid for the car. As a result, a total loss could result in you owing money on your car note with no car to show for it.
People often assume that they will receive the replacement cost of their vehicle, meaning enough money to replace the vehicle with the same or similar type, without regard for depreciation. This is a rare occurrence, as insurance companies almost always account for depreciation (reduction in value as a result of wear and tear).
Collision coverage is often very expensive. Often, choosing a policy with a higher deductible allows for a lower overall premium.
Comprehensive Insurance: Beyond the Accident
Comprehensive coverage covers losses not related to accidents. Examples include loss due to natural disasters, fire, theft and vandalism. Comprehensive coverage, like most types of auto policies, usually includes a deductible that you are responsible for.
Furthermore, it is unlikely that comprehensive policies will pay out anything other than ACV or Kelley Blue Book value. Before you obtain comprehensive coverage, determine whether your car is worth the cost. If you drive an old vehicle or a vehicle with minimal value, comprehensive coverage may be a waste of money.
No-Fault, Personal Injury Protection (PIP) and Medical Coverage
Medical payments coverage is a type of policy designed to reimburse or pay outright any medical expenses you or a passenger may incur as a result of an accident, usually without regard to fault. This type of coverage is personal and carries over regardless of whether you are driving your car or that of another.
It also may cover any injuries you or a family member may sustain if injured by another’s vehicle as pedestrians. Keep in mind that medical payments coverage policies often have a requirement that you reimburse the insurance company in the event you receive payments from another source, including the offending driver or their insurance company.
Many people have health insurance that will cover the medical costs of a car accident. Do you need medical payments coverage if you carry private health insurance? It depends. While PIP (Personal Injury Protection) coverage and no-fault coverages can offer added protection, they may very well be redundant depending upon your health insurance.
Keep in mind — some plans include coverage for childcare or lost income or wages. However, many states have mandatory insurance requirements that include PIP/no-fault coverage. Others give drivers the option.
Uninsured/Underinsured Motorist Coverage
Uninsured/Underinsured coverages are either additional policy riders or separate insurance policies designed to provide coverage in the event your are involved in an auto accident with a motorist who is either uninsured or carries the state minimum amount of auto insurance.
If you suffer catastrophic injuries in an auto accident, uninsured/underinsured coverage can provide for your continuing care in the event you exhaust the policy limits of the at-fault driver. Some states require this type of coverage, others don’t even require insurance companies to offer it.
Supplemental Insurance or Umbrella Policy
Umbrella policies — also known as supplemental insurance — are policies designed to cover everything that your regular policies do not. Usually added on to your regular coverage, supplemental insurance is available for things such as towing, car rental or other hidden expenses that may not be covered by your main auto insurance policy. The availability and necessity of this type of insurance vary from state to state.
Frequently Asked Questions: Car Insurance and Auto Accidents
Although we've tried to cover a lot, there are still plenty of questions that you may have. We've gathered some below.
By how much does car insurance go up after an accident?
Increases in rates after an accident are common, but how much depends on a lot of factors. Who was at fault, who your insurer is, what your policy is, and your overall driving record will all factor into determinations. Typically your rate won't increase until your next policy renewal.
How can I find cheap car insurance after an accident?
Because rates tend to go up, many times switching car insurance after an accident is the best way to keep your costs down. Your accident will likely still be factored into a rate from a new insurer, but it's still worthwhile to shop around if your current provider is raising your rates.
What happens if I'm at fault in a car accident?
If you're at fault in a car accident, your liability insurance will cover damages caused by the wreck to all the other vehicles. Your liability coverage will not cover any of your costs, and you may find yourself recovering nothing and having your rates increase if all you have is liability coverage.
What to do after a car accident that's your fault is to remember not to admit fault. You may think you were fully responsible, but factors you're not aware of could result in a different determination. Cooperate with the other drivers and police and be sure to document the accident thoroughly.
Following this advice and knowing what to do after even a minor car accident is the best way to protect yourself. If you are definitely not at fault, you should be able to contest a finding of fault. If you believe you were at fault, there's no harm in seeing what the determination is without your admission.
How does car insurance work when you are not at fault?
What to do after a car accident that's not your fault isn't initially any different than after any other car accident. You can follow our ultimate car accident checklist to gather information and inform your insurer.
If you're determined not to be at fault, you may have to file a claim against the other driver's liability insurance. If you have collision insurance, your provider may cover repairs to your vehicle, but they will try to get reimbursed by the other driver's insurance afterward.
How long does a car accident stay on your insurance record?
Though it can vary by state, typically a car accident remains on your driving record for three years.
When does car insurance go down after an accident?
Car insurance rates typically rise after an accident and the insurance company will not lower your rates for three to five years. This may be shorter if you take the time to shop around for other insurance companies before renewing. Companies all have different policies surrounding how long to keep rates high after a wreck.
The Last Word
Car insurance comes in a variety of types, and it can get confusing. Most states require a minimum amount of liability insurance, which only pays for the other driver's damages if the accident is your fault. Collision coverage will pay for repairs to your vehicle but is often expensive.
Comprehensive coverage applies to when you are not driving your car and covers things like trees falling or damage from hail.
There are lots of other types of insurance, and knowing your coverage is a great way to know what you can expect after your car is damaged.
Did we answer your questions about car insurance and coverage?
If you've experienced an accident or injury and feel like your insurance ought to be doing more or if you just have questions, reaching out to an insurance attorney in your area is a good first step. Often they will offer free consultations. To begin your search, enter your ZIP code into the search tool below.