American auto property damage insurance for international visitors explained
If you’re planning on buying a car, RV, or motorcycle in the United States, you’ll need insurance. But if you’re visiting from another country, American insurance can be confusing, so we’re breaking it down for you in this three part series.
This articles focuses on property damage (or casualty) insurance. (For information on American auto liability insurance, which covers you against damage you may cause to others, click here. For information on emergency medical insurance, which covers your injuries in the event of an accident, click here.)
Property Damage Auto Insurance Overview
If you’re driving in America, most states require you to carry auto liability insurance to cover damage you might do to others’ property or persons.
But auto liability insurance doesn’t cover harm to yourself or your property. For extra peace of mind, you might want to add Property Damage insurance (also called Casualty insurance) to cover damage to your own vehicle.
There are four components in a property damage insurance policy: collision coverage, comprehensive coverage, the deductible, and the premium. Let’s go over them one by one.
Property damage insurance has two coverages: collision and comprehensive.
Collision covers damage to your vehicle resulting from a collision you cause. It pays out the lesser of the value of the repairs or the value of the vehicle. If the cost of the repairs exceed the value of your vehicle, your vehicle is said to be “totalled,” and the insurance will pay out the value of the vehicle, not the value of the repairs.
Comprehensive covers damage to your vehicle resulting from theft, fire, flooding, falling objects, etc. Just like Collision, Comprehensive pays out the lesser of the value of the repairs or the value of the vehicle.
The third component in an American auto property damage insurance policy is the deductible.
The deductible (referred to in the UK, Australia, New Zealand, and many other countries as the excess) is the amount you pay before your insurance kicks in.
For example, if you have a property damage policy with a $1,000 deductible, and you cause damage to your own vehicle of $5,000, you are responsible for the first $1,000 in damage and your insurance will pay the remaining $4,000.
The fourth and final component of an American property damage auto insurance policy is the premium, which is the amount you pay for the policy. Premiums can be paid monthly, but insurance companies often offer a discount if you pay for the whole policy in advance.
The higher the value of your vehicle, the higher the premium you’ll pay, and the higher the deductible you agree to pay, the lower premium you’ll pay.
Putting it all together
To sum up, property damage (or casualty) auto insurance covers you for damage or loss to your own vehicle.
You will pay a premium to an insurer, who will then cover you against damage you may cause to your own vehicle, up to the limits of your policy, after you have covered the deductible.
And while property damage insurance covers you against damage or loss to your own vehicle, it doesn’t cover damage you cause to others property or persons, or injuries to yourself. For more information about those, head over to our articles on American auto liability insurance and emergency medical insurance.
While liability insurance is essential to drive in America, adding the two property damage coverages (collision and comprehensive) may give you some extra peace of mind on your trip through America.