Car Insurance 101: Understanding Basic Coverages. | Cheep Insurance (2024)

FAQs

What is the most basic car insurance coverage? ›

Basic car insurance is a policy that only includes liability coverage. It helps cover the damage you may cause to other people and their property. That can include medical bills, repair or replacement of property and legal fallout. Almost every state has minimum basic auto insurance limits for their drivers.

Basic car insurance provides the minimum protection allowed by your state's laws. Depending on the state you live in, it typically covers property damage for another driver and may cover injuries for them and their passengers or you and your passengers.

Insurance coverage is the amount of risk or liability that is covered for an individual or entity by way of insurance services. Insurance coverage, such as auto insurance, life insurance—or more exotic forms, such as hole-in-one insurance—is issued by an insurer in the event of unforeseen occurrences.

Full coverage car insurance is protection that includes collision, comprehensive, and liability coverage. Often, you can supplement your insurance with uninsured motorist coverage, personal injury protection, medical payments, gap insurance, and other coverage options.

USAA, Nationwide, Travelers, Erie, Geico and Progressive are the cheapest car insurance companies nationwide, according to our analysis.

If you have only liability car insurance, your own vehicle damage isn't covered if you cause an accident or if it's damaged by weather or other incidents like fire. If you have full coverage car insurance, your car is covered for accidents regardless of fault and for non-collision damage.

Unlike basic and broad, special form does not limit the perils that are covered; rather, it only lists perils that are excluded. Excluded perils will vary from policy to policy, but here are some examples of common exclusions: Earthquake. Flood.

A Standard Policy usually provides minimum liability coverage (which will protect your assets) and uninsured motorist limits of $15,000 per person/$30,000 per accident for bodily injury, and $5,000 for property damage. However, these numbers can be adjusted according to your personal needs.

At its core, insurance is a form of financial protection that helps cover the costs associated with various risks—be it a car accident, a house fire, or a medical emergency.

What is the most important thing to have in car insurance? ›

The most important ones are liability, comprehensive and collision coverage. We call them the big three of basic car insurance—coverage you can't afford to go without.

Think deeply about the exact question the agent asked, and only provide that specific information. Never admit to fault. Never admit to even being partially at fault. Never admit that you are uninjured.

Basic coverage is a “Named Peril” policy, which means that for a loss to be covered, the peril must be listed by name on the declarations page. In addition, you carry the burden of proving that a loss was caused by an included peril. Basic Form is typically the cheapest of the three coverage options.

But it typically refers to a policy that has liability coverage plus comprehensive and collision. That way, you're not only covered if you have to pay for someone else's injuries or repairs but also for repairs to your own vehicle.

Other Than Collision Coverage

Often called Comprehensive coverage, Other Than Collision (OTC) pays toward loss or damage to your vehicle caused by something other than a collision.

Basic coverage is a “Named Peril” policy, which means that for a loss to be covered, the peril must be listed by name on the declarations page. In addition, you carry the burden of proving that a loss was caused by an included peril. Basic Form is typically the cheapest of the three coverage options.

So it's important to understand insurance groups – after all, there are 50 of them in total. Cars in group 1 are the least risky from an underwriter's perspective and the cheapest to insure. Those in group 50 are the riskiest and most expensive – usually higher performance models and luxury SUVs.

1. Liability coverage. Auto liability coverage is mandatory in most states. Drivers are legally required to purchase at least the minimum amount of liability coverage set by state law.