Coverage Basics
Understanding the foundational terms and concepts that appear in every auto insurance policy.
Q1What is the difference between liability and "full coverage"?
Liability-only policies cover damage or injuries you cause to others. "Full coverage" is an informal term that usually means a combination of liability, collision, and comprehensive — so your own vehicle is protected as well. There is no standardized definition, so always confirm exactly what a given policy includes.
Q2What does "actual cash value" mean in a claim?
Actual cash value (ACV) is the current market value of your vehicle — its original value minus depreciation. If your car is totaled, your insurer pays ACV rather than purchase price or replacement cost. Gap insurance can cover the difference if you owe more on a loan than the ACV payout.
Q3Does my insurance cover a rental car I'm driving?
Your collision and comprehensive coverage may extend to rental vehicles in many situations, though the exact terms vary. Rental reimbursement is a separate add-on that pays for a rental while your own car is being repaired. Always verify with your insurer before declining rental counter coverage.
Q4If a friend borrows my car and has an accident, whose insurance pays?
In most cases, auto insurance follows the vehicle rather than the driver. If someone borrows your car with permission and causes an accident, your policy is typically primary. However, exclusions apply — if that person lives in your household and isn't listed on the policy, coverage could be denied. Review your specific policy language carefully.
Always verify coverage before lending your vehicle — exclusions vary significantly by policy.
Q5What does a deductible mean, and how do I choose one?
A deductible is the amount you pay out of pocket before insurance covers the rest of a covered claim. A $500 deductible on a $2,000 repair means you pay $500 and your insurer pays $1,500. Higher deductibles typically reduce your premium. When choosing, consider how much you could comfortably pay out of pocket if a claim occurred.
Premiums & Rates
How insurers calculate what you pay, what affects your premium, and how to think about deductibles and costs.
Q1Why did my premium increase even though I didn't file a claim?
Premiums can rise for reasons entirely unrelated to your personal claim history. Broad rate increases reflect insurer losses across an entire region. Changes in your zip code, your vehicle's value, vehicle repair inflation, or medical cost increases in your area can all drive renewal increases.
Q2What factors most influence my auto insurance premium?
Common rating factors include your driving record, vehicle type and age, annual mileage, where you live, your age and years of experience, selected coverage types and limits, and — in many states — credit history. Each insurer weights these factors differently, which is why rates can vary substantially between providers for identical coverage.
Q3Does a higher deductible always lower my premium?
Generally yes — a higher deductible reduces the insurer's exposure per claim, which typically reduces your premium. The savings vary by insurer and coverage type. Calculate how long the premium savings would take to offset the higher out-of-pocket cost if you had to file a claim.
Q4At what point does it stop making sense to carry collision coverage?
When your vehicle's market value drops low enough that the potential payout minus your deductible is close to or less than the annual premium you're paying for collision, it may not be cost-effective to maintain. Many advisors suggest evaluating this when your vehicle's value falls below roughly 8–10x your annual collision premium — but the right decision depends on your financial situation.
State Requirements
What your state requires, what no-fault means, and why minimum limits aren't always enough.
Q1Is auto insurance legally required in Tennessee?
Yes. Tennessee requires minimum liability coverage of 25/50/15 — $25,000 per person for bodily injury, $50,000 per accident for all bodily injury, and $15,000 for property damage. Driving without it can result in fines, license suspension, and registration revocation.
Q2What is a "no-fault" state and is Tennessee one?
In no-fault states, your own insurance covers your medical expenses regardless of who caused an accident — typically requiring Personal Injury Protection (PIP). Tennessee is not a no-fault state. It follows a traditional fault-based (or tort) system where the at-fault driver's liability insurance is responsible for covering others' losses.
Q3Do state minimum limits provide adequate protection?
Minimums reflect the legal floor, not what's sufficient. Medical expenses from a serious accident can far exceed minimum limits, leaving you personally liable for the difference. Many professionals recommend considering at least 100/300/100 for personal liability, particularly if you have assets to protect.
Minimum limits are where coverage must start — not where it should stop.
Claims & Policy Management
What to do after an accident, how claims affect your premium, and how to manage your policy.
Q1What should I do immediately after an accident?
First, check for injuries and call 911 if needed. Move to safety if possible. Exchange names, contact information, and insurance details with the other driver. Document the scene with photos. Avoid admitting fault. Contact your insurer promptly — most policies require timely notification even if you're unsure you'll file a claim.
Q2Will filing a claim always raise my premium?
Not always. At-fault accidents typically affect your premium at renewal. Not-at-fault claims vary by insurer and state regulation. Comprehensive claims (weather, theft) are generally treated differently from collision claims. Some policies include accident forgiveness provisions that protect your rate after a first-time claim.
Q3Can I cancel my auto insurance policy at any time?
Generally yes — most policies allow mid-term cancellation with a pro-rated or short-rate refund of unearned premium. Be aware that a coverage lapse can affect future premiums. If switching insurers, ensure your new coverage is active before canceling the existing policy.
Q4What is the auto insurance claims process like?
After reporting a claim, your insurer assigns an adjuster who reviews the incident, inspects damage, and determines the applicable coverage. You'll be asked to document losses and may need estimates from repair shops. Payment is made after your deductible and any coverage limits are applied. Timelines vary by claim complexity.
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