Car insurance is more than an important part of safe driving. It is a law for drivers to have it before operating a motor vehicle on any public roads. Choosing the right car insurance depends on the type of vehicle being insured, the driving records of all persons operating the vehicle and budget.
Because car insurance is mandatory for operating a vehicle, some people feel options for affordable coverages are limited. This is not the case, however, as multiple affordable choices do exist. Knowing how to find and compare them is the first step in discovering the most affordable car insurance coverages.
Why Car Insurance is Mandatory
Car insurance is mandatory in every U.S. state except New Hampshire. Driving in the United States is considered a privilege, albeit one with many associated risks including potential loss of life. Insurance is required to protect all drivers on public roadways from bearing the financial burdens of an accident caused by another driver. Accidents can also be caused by:
- Wayward stray animals
- Falling rocks or trees
- Downed power lines and more
The damage and costs associated with car accidents are often far above the average driver’s ability to pay for them out of pocket. New Hampshire does not require car insurance but in its place demands proof of ability to pay for potential damages. Over six million car accidents happen in the United States every year with a fatality rate averaging approximately 0.6 percent. Some times car accidents are unavoidable. The financial burden of those accidents should not fall on the shoulders of innocent drivers.
Six Main Types of Car Insurance Coverages
Car insurance is not a one-size-fits-all operation. There are six main types of car insurance coverages, all designed to protect drivers, passengers and vehicles involved in accidents. Those six main coverage types are:
- Uninsured/Underinsured Motorist
- Medical Payments
- Personal Injury Protection
1. Liability Coverage
Liability coverage is the minimum amount of mandatory coverage required by applicable state law. There are two elements to liability coverage. Bodily injury liability covers expenses incurred by other persons who are injured in an accident caused by you. Property damage liability covers expenses due to repairing property damage caused by you driving into or onto another person’s property. The average annual cost of liability-only car insurance is approximately $538.73 per year.
2. Uninsured/Underinsured Motorist Coverage
Uninsured/underinsured motorist insurance is not mandatory in every U.S. state. This type of coverage protects drivers who are victims of accidents where the offending driver has either no insurance, or insufficient liability coverage to pay for your medical bills and/or vehicle damage. Protection under this type of coverage varies per state so make sure to check your coverage terms carefully. Premiums for this type of auto insurance vary based on the amount of coverage being purchased. This also varies per state. For example, an $11 UMBI premium in Massachusetts for 25,000/50,000 policies costs $41 in Oklahoma.
3. Comprehensive Coverage
Comprehensive coverage helps pay for repairs needed as a result of burglary, natural causes such as severe weather, fire damage and more. This type of coverage is optional in every state. That being said, while your vehicle is under lease or in process of being paid off, independent lenders are permitted to require it as part of their lease/loan terms. Comprehensive coverage, when applicable, helps pay for repairs, replacement parts or total replacement of your vehicle. The average annual cost of comprehensive coverage in the U.S. is $148.04 per year.
4. Collision Coverage
Collision insurance is normally an optional coverage but might be mandatory when leasing or still paying off a vehicle. Collision insurance covers situations where your vehicle loses control due to ice or rain and crashes into a yard, fence, tree, garage, etc. Depending on the insurer this type of coverage can help pay for repairs due to applicable accidents and even full vehicle replacements. The average annual cost of collision coverage in the U.S. is $322.61 per year.
5. Medical Payments Coverage
Medical payments coverage is an extension-type of car insurance. Fundamental car insurance policies cover the driver whom owns and operates the vehicle being covered. As described above, policies can be expanded to cover non-causational victims and property damage. Medical payments coverage is designed to help pay for accident-related medical expenses regardless of who was driving the vehicle. Some states require this coverage and others do not. MedPay coverage can cost as little as $20 annually for up to $10,000 in benefits.
6. Personal Injury Protection Coverage
Some U.S. states do not allow personal injury protection coverage. In the states where this type of coverage is permitted, PIP insurance is a further extension of benefits covering financial burdens such as childcare, reduced or lost wages and more due to injuries sustained during an automobile accident. This type of coverage costs from $50 to $200+ per month depending on your age, make and model of your car and amount of coverage being purchased. Personal injury protection coverage can cost from $50 to a over two hundred dollars annually.
Most Affordable Car Insurance Companies
Car insurance premiums can be paid annually, bi-annually and/or monthly. For example, premiums paid annually require one payment per year. Bi-annual premiums require two payments per year. Some premiums combine bi-annual with monthly payments, with one larger payment made to cover the first six months of the year, and six monthly payments covering the rest.
Erie insurance has the lowest average annual premium at $835 per year. Geico’s average annual premium is $1,198 per year. Country Financial is available in nineteen states with an average annual premium of $1,136 per year. Amica, a national but lesser-known company, has a $1,183 average annual premium and includes additional perks not included with most other U.S. auto insurance companies.