Nothing is more frustrating than getting in an auto accident and thinking you are covered for something that you aren’t. The fact is that many people don’t understand what must be included in an auto insurance policy and what is an option. If you don’t select the options, you may save money but be out of luck in the time of a loss. 

Here’s what you need to know. 

What Is Basic Auto Insurance Coverage?

Basic auto insurance would cover what the state minimum requirements mandate. This is often a minimum of bodily injury liability and personal property protection. You will see the policy describe something like this: $15,000/$30,000/$5,000. This means that the insurance policy offers $15,000 in bodily injury protection per person with $30,000 as the total aggregate paid for bodily injury per accident. The $5,000 refers to the personal property protection.

This example happens to be the basic auto insurance requirement for California. 

What Is Not Covered by Basic Auto Insurance?

Basic coverage auto insurance only cover liability and will not offer payments for repairs of your own vehicle that is an accident. Should the accident be the other party’s fault, their liability insurance would fix your car. If you are at fault without collision coverage, you are responsible for all expenses out-of-pocket.

Additionally, basic coverage does not cover expenses related to wear and tear of the car. Many policies will not be sufficient if you are working as a rideshare contractor (Uber or Lyft). And maintaining only basic auto insurance will not provide payments if your car is stolen, vandalized, burns in a fire, or is damaged from something other than a collision. 

Optional Auto Insurance Coverage 

Aside from the basic coverage, a person can expand coverage of their car by adding optional coverage. 

The following is how a person can customize a policy with optional coverage:

• Liability Coverage: You can increase liability coverage beyond the state minimum requirements. Many lease companies require expanded coverage such as $100,000/$300,000/$50,000. 
• Collision Coverage: Pays for your car to be repaired in the event you are in an at-fault accident. A deductible usually applies. 
• Comprehensive Coverage: Pays for your car to be repaired if it is damaged under circumstances other than a collision. A deductible usually applies. 
• Uninsured/Underinsured Motorist: Extends liability coverage to your car and passengers if you are hit by another car that doesn’t have liability insurance. 
• Medical Payments: Pays medical bills of you or your passengers injured when you have an at-fault accident. 
• Emergency Roadside Service: Provides roadside assistance that includes towing, locksmith, tire change, or battery jump. 
• Rental Car Coverage: Pays for a rental car in place of your car when your car is in the shop as a result of an at-fault accident. 

What Is State Minimum Car Insurance?

Every state regulates its own insurance market. As such, the rules for auto insurance vary from state to state. California and Florida have extremely low minimum requirements with California being $15,000/$30,000/$10,000 and Florida being $10,000/$20,000/$10,000. Alaska is one of the highest with coverage required at $50,000/$100,000/$25,000. Most states fall somewhere near requiring $25,000/$50,000/$25,000.

When Should You Drop Full Coverage On Your Car?

If your annual payment for car insurance with comprehensive and collision coverage is equal to at least 10% of your car’s value, you might want to drop those coverages. Essentially, when it becomes too expensive to fix a car is when you want to drop the coverage because insurance carriers will simply total the car out and pay you that value rather than replace the car. In some cases, you might only get $1,000 for an older car with minor damage but there isn’t a large supply of parts to fix it.