One of the most important (and trickiest) parts of buying car insurance is deciding how much protection to get. This page aims to clarify your options when it comes to coverage limits and explain the different types of car insurance coverage available.
Car insurance coverage limits
A driver's auto insurance coverage limit denotes the maximum amount of money an insurer will contribute toward a single claim. If you have a medical payments coverage limit of $5,000 per incident, then $5,000 is the max payout you can receive through that coverage after you file a claim.
How to set your auto coverage limits
Each policy is unique, like its policyholder. So there's no universal method for choosing how high or low to set your car insurance coverage limits.
Finding the limits that work for you when you get a car insurance quote involves assessing your own finances and accident risk. Ask yourself, "Can I afford to pay accident fees out of my own pocket?"
If you have $10 million in your third-favorite checking account, you may be able to afford unforeseen and exorbitant expenses after a car accident. In that case, opting for lower limits just means you're willing to assume more of the risk each time you get behind the wheel.
If, like most people, you don't have that kind of emergency fund on standby, paying slightly higher premiums for higher coverage limits can offer a great amount of financial protection in case you're in an accident.
No matter how skilled you are behind the wheel (and we don't doubt it), accidents can and do happen. Through auto coverage limits, you can tailor your policy to protect your financial assets and provide you with much-needed peace of mind.
Types of car insurance coverage
Generally speaking, auto coverages break down into 3 distinct categories: liability, vehicle-based, and medical.
Medical coverages for drivers
Medical coverages are designed to pay for the medical care of you and your passengers after an accident.
Medical payments coverage
Medical payments coverage, also known as medical and funeral services payments, can help cover accident-related medical expenses (including funeral expenses) for you, other drivers on your policy, and passengers. It can also offer coverage if you're struck by a car as a pedestrian or cyclist.
More on medical payments coverage >
Personal injury protection (PIP) coverage
Personal injury protection can help cover medical expenses for you and your passengers after an accident, regardless of fault. Offered (or required) in no-fault states, PIP is a complex coverage that varies widely by state. In general, it covers hospitalization, rehabilitation, other medical expenses, and (sometimes) lost wages up to the limits you select.
No-fault states restrict what drivers can and can't legally recoup from other drivers after an accident. In these states, you (and your insurer) are responsible for your own medical expenses up to a state-specific threshold.
More on PIP coverage >
Coverages that protect your vehicle
When your car stops running, so does your daily routine. That's why Esurance offers a slew of vehicle-based coverage options designed to help get your car or truck back on the road after an accident.
This coverage is for all those unpredictable elements that spring up on the road or in your driveway. Comprehensive coverage, also known as "comp" or "other than collision," can help pay for repairs (or replacement, if your car's totaled) after your car's damaged by a natural disaster, vandalism, theft, fire, or a falling tree branch.
Glass damage is typically covered under comprehensive coverage, too.
Collision coverage, together with comprehensive coverage, is a key component of what's often referred to as "full coverage." While your property damage coverage helps others repair their cars, collision is there to assist you. If you've caused an accident, collision helps to either repair damage or replace damaged parts of your car.
Comprehensive and collision coverages are not state-mandated coverages, but they may be required by a loan or leasing company.
More on comprehensive and collision coverage >
Emergency roadside service (ERS) coverage
While no one can doubt the importance of collision and comprehensive coverages, none of them spring into action until the car gets to a repair shop. In the meantime, there's still the matter of towing and other roadside service fees, which can rack up in a hurry. This is where emergency roadside service comes in.
ERS (called towing and labor coverage in some states) can be purchased on policies that have collision coverage. It can be a big lift to those marooned by mechanical failure or in need of maintenance like tire changes, gas fill-ups, battery jumps, etc.
More on emergency roadside coverage >
Rental car coverage
This coverage reimburses you for the cost of your rental car if your insured vehicle is in the shop or is unavailable due to an accident. You need to have comprehensive and collision on your policy in order to add rental car coverage. In certain states, Esurance offers CarMatch Rental Coverage® which provides you the full rental cost of a vehicle comparable to yours.
More on rental car coverage >
Loan/lease gap coverage
We all know that a car's value depreciates over time. But if you financed or leased a vehicle and have an accident that's declared a total loss, you might end up owing more to your financing or leasing company than the car is worth.
This is where loan/lease gap insurance can be a real saver.
Insurers don't determine your actual cash value (ACV) settlement based on what you owe, but rather on what the car is worth just prior to the accident. Let's say you owe $20,000 on your new Mini Cooper, but your car is now only worth about $16,000. If your car is totaled, you might get a settlement check of $16,000 but still owe an additional $4,000 on your loan or lease.
Loan/lease gap insurance (as its name suggests) helps bridge this divide between the ACV and what you still owe.
More on insurance for your loaned or leased car >
Customized parts and equipment coverage
It's only natural that you want your ride to reflect your personal style, and that's where customized parts and equipment insurance can help.
It insures items like stereos and TV equipment, navigation systems, phones, custom grilles and spoilers, custom paint, furniture, and paintings or murals. Esurance also offers up to $4,000 worth of coverage on equipment for disabled drivers and passengers.
If you put a lot of time and effort into enhancing your ride, this coverage can be a vital component of your car insurance policy.
More on customized parts and equipment coverage >
Liability is a type of car insurance coverage that's legally required in most states. It pays for damaged property, medical care, and lost wages for other drivers and passengers if you're found at fault in an accident.
As liability coverage is required in nearly all states, so, too, are the coverage limits that come with it. Each state sets its own minimum limits (minimum maximums) that drivers must maintain on their car insurance policies. These minimums are typically expressed in a 3-tier system: 25/50/15, for example. These numbers mean the following:
- 25 – The maximum amount (in thousands) the insurer will contribute toward injury-related expenses per person
- 50 – The total amount the insurer will contribute toward injury-related expenses per accident
- 15 – The max amount the insurer will pay for property damage for each accident
When you buy your policy, you won't be able to select limits below your state's legal requirements. But you can always set limits that are higher.
Liability coverage generally breaks down into 2 main categories: bodily injury and property damage.
Bodily injury (BI) and property damage (PD) liability coverage
BI and PD liability are the basic building blocks of a typical car insurance policy. Bodily injury insurance covers medical expenses and lost wages for injured drivers or passengers, while property damage insurance covers the repairs or replacement of damaged cars and other property (e.g., a garage, fence, porch, etc.).
Liability insurance can also help defray legal fees if you're sued for further damages.
More on bodily injury and property damage coverage >
Liability coverage in no-fault states
In the states with no-fault insurance, insured drivers are typically compensated for medical expenses by their own insurers, regardless of who caused the accident. Nonetheless, BI liability coverage is still required in no-fault states because if injuries reach a certain severity, the at-fault driver may be sued by the injured party. If that happens, your BI coverage can help cover your liability expenses.
Generally speaking, property damage liability works the same in no-fault states as it does in other states. In other words, the driver found at fault is responsible for any damage caused by the accident.
Uninsured/underinsured motorist liability
There are 2 types of uninsured and underinsured motorist liability coverage: bodily injury and property damage. Both are designed to protect you, financially, from drivers with minimal or no coverage. Some states require drivers to have some form of this coverage. In other states, it's an option.
Uninsured motorist bodily injury liability coverage can help pay for medical expenses and lost wages of policyholders, authorized drivers, and passengers when the accident-causing driver is uninsured.
Underinsured coverage works similarly to uninsured insurance, except this coverage steps in when the at-fault driver's liability limits aren't enough to cover your post-accident expenses.
Uninsured/underinsured motorist property damage coverage helps pay for your car's repairs if the at-fault driver doesn't have enough of the required property damage coverage or it they are uninsured.
More on uninsured/underinsured motorist coverage >
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