Insure your vehicle

Insuring Your Vehicle

In previous steps, we described 1) how to establish a presence in a US state in order to own a vehicle there,  2) how to purchase and pay for a vehicle in the US, and 3) how to register your vehicle in the state where you established your presence.

In this step, we explain how to obtain insurance for your vehicle.

American Auto Insurance Basics

It's worth taking a moment to understand how auto insurance in the United States works. Even if you never have to call on your policy (we hope you don't!), learning a few key points will help you understand what you're buying.

The two types of insurance: liability (third party) and property (first-party)
Driving a vehicle creates two basic types of risk: the risk that you damage someone else's person or property, and the risk that your own property becomes damaged.
Liability (third-party) insurance
Auto liability insurance covers you if you’re legally responsible for damage to someone else's property or injuries to someone else in a car accident.

Your insurance steps in to pay for some or all of the injured party’s expenses, rather than you paying out of pocket for another person’s medical costs or repair their property.

Auto liability insurance is legally required everywhere.
Property (first-party) insurance
Property insurance covers damage to your vehicle.

In the United States, auto property insurance is divided into two separate coverages: collision and comprehensive.

Collision coverage can pay to repair or replace your vehicle if it's involved in an accident with either a stationary object or another vehicle.

Comprehensive coverage can pay to repair or replace your vehicle if it's damaged by non-collision events that are outside of your control. This includes theft, vandalism, fire, weather, or other acts of nature.

Property insurance is optional.
How much you pay if something happens
How much your auto insurance policy costs depends partly on how much you're willing to pay if something happens. Here are the factors that decide how much you pay.
Liability Limits
If you cause an accident, your insurance company will pay for the first dollar of costs, up to the liability limit that you chose when you booked (or last revised) your policy.

Liability coverage is usually broken into three separate numbers that indicate your liability limits for bodily injury and property damage. For example, the minimum limits for auto liability in Montana are $25,000/$50,000/$20,000. Here’s what those numbers mean:

- Bodily injury per person: $25,000 is the maximum amount your insurance company will pay out for injuries per person.
- Bodily injury per accident: $50,000 is the maximum amount your insurer will pay out for injuries per accident.
- Property damage per accident: $20,000 is the maximum amount your insurer will pay out for damage to someone else’s vehicle or property per accident.

If you cause more bodily injury or property damage than your insurance policy's limit, you're responsible for the cost above your liability limit.

The limits you choose for your insurance policy are up to you, but recommends selecting limits of $100,000/$300,000/$100,000. The cost difference between minimum coverage and 100/300/100 coverage is often less than $100 for a six-month policy.
If your vehicle is damaged (and another driver's insurance doesn't cover the damage), your property insurance only kicks in after you have paid the deductible.

(The deductible is called the "excess" in other parts of the world.)

The standard deductible is $500, but raising it (to $1,000, for example) will lower the up-front cost of your insurance policy.
Other coverages that you might be interested in
Liability and property (collision and comprehensive) are the two main coverages that you'll be concerned with. There are several other coverages that you might want to consider.
Roadside assistance
Roadside assistance covers the cost to send someone to repair a flat tire, tow your vehicle to a service station, and other similar services. AAA is the most widely known name in this space, but most insurance companies offer this coverage at a similar price. (They're both going to call out the same towing company.)
Rental reimbursement
If your vehicle is in the shop because of an accident, rental reimbursement covers the cost of a rental car (up to a daily amount that you specify) while your vehicle is out of service.
Uninsured / Underinsured Motorist
If someone hits your vehicle, and they a) don't have any insurance, b) don't have enough insurance to cover the damage, or c) drives away without providing their insurance information, uninsured / underinsured motorist coverage kicks in to cover the damage.
Personal vs. Commercial Insurance
A personal auto insurance policy covers a vehicle being driven for non-commercial purposes.

Coverage under a personal auto policy automatically stops when a vehicle is used for making deliveries, driving for a ride-sharing platform, or used for other commercial purposes.

Notice that the distinction between a personal and commercial policy has nothing to do with the vehicle's ownership.

An individual still needs a commercial auto policy to drive for Uber or Lyft, even if the vehicle is owned by, and registered to, the individual.

If the vehicle is only being used for non-commercial purposes, a personal auto policy is appropriate.

If you're planning on driving for a ride-sharing platform, you will need commercial auto insurance. These days, most auto insurers offer hybrid policies that switch from personal to commercial when a vehicle is being used for ridesharing.

Who is covered to drive a vehicle?
Every auto insurance policy has Named Insureds, or individuals who are automatically covered by the insurance policy.

The Named Insureds don't necessarily have to own the vehicle.

If a Named Insured gives permission to someone to drive, their insurance automatically extends to that person.

Cost of insurance
The cost of an insurance policy depends on a number of factors: which coverages you choose, the value of your vehicle, the liability limits and deductible value that you choose, your age, and more.

The best way to estimate the cost of an insurance policy is to visit a couple of insurance websites and follow their process to get quotes.

Before you get quotes, you should understand a few peculiarities about America that might cause our auto insurance to be more expensive than it is in your home country.
The United States does not have a public healthcare system
Auto insurance in countries that maintain a public healthcare system doesn't need to cover bodily injury - the government picks up the costs for injuries.

The government does not automatically pay for healthcare costs in the United States, so the cost of auto insurance is higher than it would be if we had public healthcare.
The United States is the most litigious society in the world
Americans love a lawsuit. The cost of legal and court fees related to vehicle accidents is often paid by insurance companies. The insurance companies pass these costs on to customers in the form of higher insurance policy costs.

Insurers that don't require a US driver's license

Most American insurance companies require a driver's license issued by a US state. For international visitors to the United States, this ranges from impractical to impossible.

However, a handful of American insurers don't require a US driver's license.
Progressive Insurance, headquartered in Mayfield, Ohio, carries an A.M. Best rating of "A+ Superior" for its superior ability to meet ongoing insurance obligations.

Its customer service consistently ranks highly among large insurance companies.

Start with Progressive if you're buying car, truck, van, or motorcycle.
National General
National General Insurance Company, headquartered in Winston-Salem, North Carolina, also carries an A.M. Best rating of "A+ Superior," and their customer service is great.

Good Sam is America's most popular recreational vehicle membership club, and their policies are underwritten by National General.

Start with National General (via Good Sam) if you're buying an RV.

Where to book your policy

In the United States, insurance is regulated at the state level, and priced at the zip code (neighborhood) level.

If you book your policy at an address where your vehicle never spends any time, and you get into an accident in a part of the US where a lot of accidents happen, your insurance company may think that you lied on your application to get cheaper insurance - and they may not pay your claim.

You should use the address where your vehicle will spend the most nights during your visit.  Preferably, this will be the address of a friend or family member who wouldn't mind receiving mail that the insurance company might spend.

This doesn't impact the driving history of your friend or family member - it's your policy.

In the end, it's most important to take out an auto policy at an address where your vehicle will spend at least one night.

Insurance policy lengths and refunds

Auto insurance policies are issued in six- or 12-month terms in the United States.

You can cancel your policy at any time, and you'll receive a refund of your unused premium, less a fee (usually 10% of the unused premium).

Insurance companies usually offer multiple payment plans: paid-in-full and installments. Insurers usually offer a paid-in-full discount (usually 10%), and charge installment fees ($5-20) for each installment.

As a rule of thumb, if you are visiting the US for longer than half of the term offered (i.e., if you're offered a six-month term, and you're staying for four months), you're better off paying in full and getting a refund when you cancel at the end of your visit.

Next Steps

How vehicles work in the US

Learn how vehicle purchase, registration, and insurance works in the United States in general.

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