Unlike health insurance, car insurance policies are actually made up of several different types of coverage each with its own premium and benefits. If you’re shopping for auto coverage, knowing the different types of auto insurance and their coverages is an important step in getting the policy that’s right for you. Its important for consumers to understand what is being covered to construct the best policy package.
The vast majority of vehicle owners choose to purchase car insurance that meets certain minimum standards of coverage. Car insurance companies offer other types of car insurance that can provide greater protection if someone gets hurt in a car accident, or a vehicle becomes damaged. In order to make the right decision on the best car insurance policy for you, you need to have a basic understanding of the different types of available coverage. Here are a few of the basic car iwnsurance types, how they work and what they cover.
Liability coverage : Liability coverage is considered as a legal requirement to drive a car. Liability auto insurance is actually the combination of two types of coverage: Bodily Injury (BI) and Property Damage (PD). In order to drive in most states, motorists must have some form of liability coverage or demonstrate another form of financial responsibility. Liability insurance may help cover damages for injuries and property damage to others for which you become legally responsible resulting from a covered accident. Liability coverage is to ensure that drivers that end up hurting others or damaging property can property compensate the other party.
Collision insurance : Collision insurance may cover damage to your car after an accident involving another vehicle and may help to repair or replace a covered vehicle. Collision coverage is an optional insurance rider, although ValuePenguin recommends you to include it in your policy. Collision insurance pays for repair costs to your own vehicle if it turns out you were responsible for the accident. Collision coverage will pay for repairs to your car while the insurance company attempts to prove your innocence and get their money back.
Comprehensive insurance : Comprehensive car insurance covers vandalism, theft, and damage from natural disasters. Comprehensive insurance can provide an extra level of coverage in the instance of an accident involving another vehicle. A common misunderstanding about comprehensive insurance is that it covers everything. It does not. It only covers automobile damages from non-collision accidents and will not cover personal items, such as your wallet or car radio, if they are stolen.
Uninsured motorist insurance : Uninsured motorist insurance can protect you and your car against uninsured drivers and hit-and-run accidents. Despite most states mandating that drivers carry auto insurance liability protection, there are still a number of motorists on the road without any insurance coverage. While this is a relatively low-cost coverage to include and incredible critical in time, some states actually include UM/UIM as part of the minimum required auto insurance. This coverage is often paired with underinsured motorist insurance. Underinsured motorist insurance can protect you in the event of an accident with a driver whose insurance is not enough to cover the costs.
Medical payments coverage : Medical payments coverage can help pay medical costs related to a covered accident, regardless of who is at fault. Medical payments coverage pays for medical expenses for you and passengers in your car when you get into a car accident.
Personal injury protection insurance : Personal injury protection will pay for the medical expenses of you or anyone else covered by your policy. It is also known as PIP or no-fault car insurance. Personal injury protection insurance may cover certain medical expenses and loss of income resulting from a covered accident.
Gap insurance : Gap insurance help certain drivers cover the amount owed on a car loan after a total loss or theft. If a vehicle is subject to a car loan or lease when it gets totaled, its actual cash value may be less than its lease value or the amount still owed on the car loan.
Towing and labor insurance : If you already have comprehensive car insurance, towing and labor insurance may reimburse you for a tow and for the labor costs to repair your vehicle. Towing and labor (TL) coverages and limits are different for each carrier that offers towing and labor coverage, but typically, it pays the cost of towing your car to a repair shop when it is unable to be driven and covers a specified amount of necessary labor charges at the place of the breakdown. Before buying towing and labor coverage from your car insurance provider, compare stand-alone roadside assistance plans, and prices, against it to see which one best covers your needs.
Rental reimbursement insurance : Rental reimbursement insurance helps pay for a rental car if your vehicle cannot be driven after an accident. It does not apply if your vehicle needs routine maintenance work or if you need to rent a car on vacation. When you can use rental reimbursement coverage depends on the other types of coverage you have on your car insurance policy.
Classic car insurance : Classic car insurance is to protect them against damage and the increased risk of theft. Classic car insurance provides specialized coverage designed for the unique needs of vintage and classic car collectors.