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What is auto insurance?



What is car insurance?

Car insurance covers damage to your vehicle and protects you financially if you're liable for someone else's injuries or damages. Auto insurance can also pay for medical bills if you or your passengers are injured in an accident or you're hit by an uninsured or underinsured driver. Your policy protects you up to certain limits, agreed upon by you and your insurer.

Basic personal auto insurance is mandated by most states and provides you with some financial protection in case of an accident. But is it enough? What are the options? Learn how car insurance works and what types of coverage are available.

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Understanding auto insurance—the basics

Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

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Auto insurance provides coverage for:


Property – such as damage to or theft of your car

Liability – your legal responsibility to others for bodily injury or property damage

Medical – the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Basic personal auto insurance is mandated by most U.S. states, and laws vary. Auto insurance coverages are priced individually (a la carte) to let you customize coverage amounts to suit your exact needs and budget.

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Policies are generally issued for six-month or one-year timeframes and are renewable. The insurance company sends a notice when it’s time to renew the policy and pay your premium.


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Who is covered by my auto insurance—and under what circumstances?

Your auto policy will cover you and other family members on your policy, whether driving your car or someone else’s car (with their permission). Your policy also provides coverage if someone who is not on your policy is driving your car with your consent.


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Your personal auto policy only covers personal driving, whether you’re commuting to work, running errands or taking a trip. It will not provide coverage if you use your car for commercial purposes—for instance, if you deliver pizzas.


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Personal auto insurance will also not provide coverage if you use your car to provide transportation to others through a ride-sharing service such as Uber or Lyft. Some auto insurers, however, are now offering supplemental insurance products (at additional cost) that extend coverage for vehicle owners providing ride-sharing services.


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Is auto insurance coverage mandatory?

Auto insurance requirements vary from state to state. If you're financing a car, your lender may also have its own requirements. Nearly every state requires car owners to carry:


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Bodily injury liability – which covers costs associated with injuries or death that you or another driver causes while driving your car.

Property damage liability – which reimburses others for damage that you or another driver operating your car causes to another vehicle or other property, such as a fence, building or utility pole.


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In addition, many states require that you carry:


Medical payments or personal injury protection (PIP), which provides reimbursement for medical expenses for injuries to you or your passengers. It will also cover lost wages and other related expenses.


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Uninsured motorist coverage reimburses you when an accident is caused by a driver who does not have auto insurance—or in the case of a hit-and-run. You can also purchase under insured motorist coverage, which will cover costs when another driver lacks adequate coverage to pay the costs of a serious accident.


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Even if PIP and uninsured motorist coverage are optional in your state, consider adding them to your policy for greater financial protection.


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What other types of auto insurance coverage are typical?

While most basic, legally mandated auto insurance covers the damage your car causes, it does notcover damage to your own car. To cover your own car, you should consider these optional coverages:


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Collision reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object—e.g., a tree or guardrail—when you’re at fault. While collision coverage will not reimburse you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car.


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Comprehensive provides coverage against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, hail, falling rocks or trees and other hazards—even getting hit by an asteroid!


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Glass Coverage provides coverage from windshield damage, which is common. Some auto policies include no-deductible glass coverage, which also includes side windows, rear windows and glass sunroofs. Or you can buy supplemental glass coverage.


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What is gap insurance and do I need it?

Collision and comprehensive only cover the market value of your car, not what you paid for it—and new cars depreciate quickly. If your car is totaled or stolen, there may be a “gap” between what you owe on the vehicle and your insurance coverage. To cover this, you may want to look into purchasing gap insurance to pay the difference. Note that for leased vehicles, gap coverage is usually rolled into your lease payments.


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Do I need car insurance?

Auto insurance is required in all states except New Hampshire (New Hampshire still requires financial responsibility if you cause an accident, so you'll want to be properly insured). Driving without insurance can result in a fine, license suspension, or even jail time. Progressive, and most other insurers, will ensure any policy you select meets your state's requirements.


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What does auto insurance cover?

Auto insurance covers a variety of mishaps that can occur on or off the road. Although coverages may vary by state, these are the standard coverages on most auto insurance policies:

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Liability

Auto liability coverage is required in 49 states. If you're found at fault in an auto accident, liability coverage can pay for damage to other vehicles, damage to objects, injuries to other drivers and their passengers, and lawsuits if you're sued due to an accident.


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Comprehensive

Comprehensive coverage protects against damage to your car from events beyond your control, including theft, windshield and glass damage, vandalism, falling trees and more.

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Collision

Collision coverage covers your vehicle if it overturns or collides with another vehicle or object, including trees, guardrails, and fences.


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Medical Payments/Personal Injury Protection (PIP)

Medical payments coverage is offered in most states, while personal injury protection is a broader coverage that is available only in the states that require it to be offered. Both cover medical bills if you or your passengers are injured in a car accident (regardless of fault).


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Uninsured/Underinsured Motorist Bodily Injury (UIM) and Property Damage (UMPD)

UIM can pay for injuries caused to you and your passengers when you're hit by a driver with no insurance or not enough coverage. UMPD can pay to repair or replace your vehicle if it's damaged in an accident with an uninsured or underinsured driver.


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Other optional coverages

Includes rental car reimbursement, loan/lease payoff (also known as gap coverage), and roadside assistance.



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Explore more auto insurance coverage options with Progressive.


What does car insurance not cover?

A basic car insurance policy won't cover wear and tear, people who regularly drive your car but aren't listed on your policy, and driving on a ridesharing platform. However, you can sometimes add coverage or purchase a separate policy or warranty to cover the things your auto policy doesn't. For example, you can add rideshare coverage to your Progressive auto policy.


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How is car insurance priced?

Insurers consider many factors when pricing your auto policy, including your age, driving history, location, and type of car. Learn more about car insurance cost factors and the average cost of car insurance.


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What is a car insurance premium?

Your auto insurance premium is the amount of money you pay your car insurance company in exchange for coverage. You generally have the option to pay your premium monthly or in full.


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What is a car insurance deductible?

Your deductible is the out-of-pocket expense you pay before your insurer will cover your claim.


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For example, you have a $500 deductible, hit a telephone pole, and your car repairs cost $2,000. You'll pay $500, and your insurer pays the remaining $1,500. You can choose your deductible amount from the options offered by your insurer.


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The higher your deductible, the more of the claim expense you're responsible for. That means your out-of-pocket costs will be higher, but you'll have a lower overall rate, and vice versa.


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Does car insurance cover maintenance?

Maintenance, mechanical failures, and wear and tear to your vehicle aren't covered by auto insurance. If your vehicle is disabled anywhere in the United States or Canada, Progressive's roadside assistance coverage can pay for a tow to the nearest mechanic.


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