6 common questions about car insurance, answered

Rachel Hartman

When it comes to car insurance, sifting through factors such as your state’s liability coverage requirements and changes in your annual premium can get confusing – fast.

Waiting to find out just what your policy covers when you need to file a claim can bring major risks.

“The time you don’t want to find out about your insurance policy is after an accident,” says Pete Moraga, a spokesman for the nonprofit Insurance Information Network of California. If you have only state-mandated liability coverage, for instance, and you get into a crash, you could end up shelling out a big chunk of change to fix your own vehicle.

Experts offer answers to six of our most commonly asked questions about car insurance.

1. If I meet my state’s minimum requirements, is that enough?

Most states have minimum requirements when it comes to car insurance. These generally cover liability issues: The first two numbers cite bodily injury limits and the third figure refers to the property damage liability limit. In 49 states, basic liability coverage is required; the only exception is New Hampshire.

California, for instance, has requirements of 15/30/5 for car insurance. This means that if you get into an accident, the injured folks would receive up to $15,000 per person, with a maximum limit of $30,000. Coverage for damage done to another vehicle or to property would be just $5,000.

Some state also require drivers to carry uninsured and underinsured coverage, which helps cover the costs if you get into a crash with another motorist who either doesn’t have car insurance at all, or doesn’t have enough to pay for the damage and medical expenses.

State requirements – while a good starting point – often are too low to cover all expenses stemming from a crash. “In California, even a five-mile-an-hour fender bender could cause $6,000 or $7,000 of property damage,” Moraga says.

To make sure your wallet and possessions are protected, consider increasing the liability limits on your car insurance policy. “A good rule of thumb is to carry liability limits sufficient to protect your assets, such as your home, savings and retirement funds,” says Brian Rauber, a Farmers Insurance agent in Missouri.

2. What does “full coverage” mean?

In most cases, “full coverage means the policy pays to repair damages to your vehicle,” Rauber says.

In the insurance world, “full coverage” usually refers to comprehensive and collision coverage on your auto policy. Collision provides coverage if your car and another vehicle hit each other; it also offers protection if your vehicle hits an object, such as a tree or a pole. Comprehensive extends further, covering damage from natural events, such as hail or a falling tree branch; it also covers issues such as theft, vandalism and even hitting a deer while driving.

While “full coverage” often includes extensive protection, it should be noted that even if you feel fully protected, the policy still has limits. “Any damages beyond those limits are the responsibility of the customer,” Rauber says.

3. I’m going on vacation and renting a car. Do I need extra insurance?

Probably not. “As long as a customer has full coverage on their personal vehicle, the policy will cover them in a rental car,” Rauber says.

One note: In the event of a crash, some rental agencies may charge high fees for the period that the vehicle is being repaired. These “loss of use” fees may not be covered by your personal car insurance policy.

Before renting a car, carefully read the contract with the rental agency. Also, make sure you understand your own policy so you’re aware of what’s covered – and what’s not.

4. How will a speeding ticket affect my rates?

A run-of-the-mill speeding ticket (for going about 10 miles per hour over the limit) may have only a small effect – if any – on your insurance rates.

If you had, before the ticket, received a discount for a clean driving record, the speeding ticket could cause that discount to be removed. “Discounts of up to 10 percent are typically given for a clean record,” says R.J. Weiss, a certified financial planner specializing in insurance planning at Weiss Insurance Agencies in Illinois.

5. I got into an accident. Will my premium go through the roof?

While every insurer has different guidelines, it would be unusual for you to be penalized for an accident that you didn't cause, Rauber says.

If you were found to be at fault, however, rates may go up. The increase will depend on your policy, insurer and driving history. Surcharges -- the amount added to your premium after an accident -- can be 20 percent or more and will take effect once your policy is renewed, Rauber says.

6. What does rental car reimbursement coverage include?

As an optional item on your policy, rental car reimbursement usually is listed in a format such as 30/900. This means that if you rent a car while your own vehicle is getting repaired, you’ll be covered for $30 a day up to 30 days or until rental costs hit $900.

This coverage doesn't apply to regular car maintenance, thought. “Rental car coverage is only included as a result of an accident – if a car breaks down and is in the repair shop, there’s no coverage for that,” says insurance agent Sierra Knight, owner of KMI Solutions LLC in Virginia.

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