Spoiler alert: In most cases, your auto insurance is for both you and your car — but mostly you. Now that the suspense is gone, let’s explore which coverages are for you and which ones are for your car.
From a coverage standpoint, in most cases, auto insurance follows the car. But that is a more in-depth topic — and it has some exceptions. Here, we are looking at which coverages protect you (or your car) and how your coverage protects you financially.
Basic car insurance covers liability. In the insurance world, liability refers to a loss caused to others. These losses are measured in monetary terms, including the cost of injuries or the cost of damage to the property of others. Many brokers might explain this coverage as coverage for other people. That is correct. However, it is also coverage for you. Without liability coverage or in cases where you do not have enough liability coverage, you may have to pay for damages out of pocket. The numbers can add up quickly, so it is safe to say that liability coverage also protects you.
Liability coverage will not protect your car, however. From a legal perspective, you cannot be financially liable to yourself, so even an accident in which you were at fault will not be covered by your liability coverage if your car needs repair. Instead, 1 of 2 other coverages might apply.
If you have collision coverage, this coverage protects your car against risks like impact with other vehicles or stationary objects. Your collision coverage also protects your vehicle if you have a rollover. Comprehensive coverage protects against a wide range of other risks. These include theft, fire, floods, and accidents involving animals. It is fair to say that collision and comprehensive coverage protect your car — but they also protect you. Without these coverages, you’d have to pay for damage to your vehicle out of pocket. For some cars, the cost of repair or replacement can be high.
Depending on insurance rules where you live, your policy may also offer protection for the cost of injuries to you or your passengers. Rules vary based on location, but if your policy has medical coverage, this coverage also benefits you.
Most jurisdictions in the US and Canada require liability insurance by law. Collision and comprehensive coverage are optional, but most lenders require these coverages. But even when not required, full coverage can be an effective way to protect yourself against a large financial loss. For older vehicles, these coverages may be more affordable than you think.
If you are thinking about getting full coverage or want to go over your coverage limits, just reach out to your broker to schedule a policy review. Just like your car, your auto policy might need a tune up from time to time.