Auto and Renters Insurance Coverage: Everything you need to know about it

Buying a new car in a dealership

Getting car insurance before you start driving your car is not only a smart and sensible move, but it can save you from a lot of financial and legal trouble. With millions of road accidents every year in the US, driving without auto insurance is like going on rafting without a life jacket. You can continue to raft, but the moment you fall in the stream, you’d regret not having the life jacket.

When it comes to auto insurance policies, there are two broad options to choose from, and the choice depends solely on your needs. In this article, we’ll describe in detail everything you need to know about both auto insurance and renters insurance; what they are, when you’ll need them, and what coverage these policies offer. Let’s get started.

Auto Insurance and Renters Insurance Policy

Auto insurance encapsulates both general and renters auto insurance. This means that there’s not much difference when it comes to the coverage both policies offer. The difference comes in the validity of the coverage, price, and requirement. First, let’s see what both these policies could offer, and then we’ll get to the subtle differences between the two.

Liability Insurance Coverage

Perhaps the most important part of auto insurance is liability insurance coverage. This is the policy that’s mandatory in 48 states in the US (the exception being New Hampshire and Virginia). This means that if you want to drive a car legally in these 48 states, you’ve got to have a valid liability insurance policy. It is so important that most dealerships won’t let you take the car unless you’ve got liability insurance coverage.

Each state has its minimum coverage limit for liability insurance. This is the amount of money your liability insurance policy must be able to pay in case of an accident. The limit is usually represented using three numbers, for example, 50/100/25. Here’s what it means.

The first amount (50) represents the amount the auto insurance would pay to cover the cost of medical treatments for a single person. Here, 50 means the amount is $50,000.
The second amount (100) is the amount the liability insurance coverage would pay to cover the cost of medical treatment per accident. So if there are multiple people involved in an accident, this is the total amount your insurance company would pay for the medical treatment costs.

The final amount (25) is the amount the insurance company would pay for the cost of repairs of the other vehicle or property that got damaged in the accident caused by you.

A couple of things. Firstly, liability insurance cannot be claimed by the policyholder. It can only be claimed by the other driver who’s involved in a car accident that it’s your fault. Secondly, while the state-mandated minimum coverage limit is usually around 50/100/25, it is recommended that you get a liability policy with a higher coverage limit. If in an accident your insurance policy is lacking, you’ll have to pay the remaining amount from your pocket.

Collision Insurance Coverage

This insurance policy is what covers the cost of repairs to your car. So in case of an accident, irrespective of whose fault the accident was, you can claim your collision insurance policy to pay for the car’s repairs. Collision insurance policies can be quite expensive, as expensive as a liability insurance policy.

If you get in a car accident and the driver at fault does not have liability insurance or has one but with an insufficient coverage limit, you can claim your collision policy in this case as well. Not just accidents, but if you drive your car into a tree, an animal, or someone’s property, you can claim collision insurance and get the money for the repairs.

The cost of a liability insurance policy depends on your driving record, the make and model of your car, and so many other factors including the state that you live in. So to find the best prices, you need to be very specific. For example, if you live in Texas, you need to look for the Best Cheap Car Insurance in Texas, along with the best coverage option.

Police attending a car accident

Comprehensive Insurance

Comprehensive coverage is auto insurance for natural calamities and accidents that you cannot control. It is also referred to as “parked car” insurance because of the types of damages it covers. Comprehensive insurance covers damages such as fires, floods, hailstorms, earthquakes, theft, vandalism, damage due to animals, riots, etc. Almost all the accidents that damage your car (and you are not responsible for) will be covered under this policy.

Personal Injury Protection

In 12 states, which are called “no-fault” states, along with liability insurance, it is mandatory to carry a personal injury protection plan that covers the cost of medical treatments for injury caused in an accident. It does not matter whose fault the accident was, drivers can use their PIP to cover the cost of medical treatments.

Uninsured/Underinsured Motorists Coverage

This auto insurance policy kicks in when the driver at fault is either lacking a liability coverage or the liability insurance’s minimum coverage limit are not enough to cover the cost of repairs and medical treatments.

What Makes Renters’ Auto Insurance Policy Different?

You cannot get a general auto insurance policy for less than 6-months. You’ll have to pay for many months, even if you need the coverage for a few days. So renters’ auto insurance policy provides the coverage of general auto insurance (which includes liability coverage, collision plus comprehensive coverage, and other additional coverage as well) but the payment can be done daily.

So let’s say that you are out in some other country for a few weeks and want to use a car. Getting renters insurance would require you to pay only a few dollars per day. Depending on the type of coverage you get, it could be anywhere from $20 a day to $80. Apart from this, there’s rarely any difference between the two auto insurance policies.

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