What Are the Different Types of Auto Insurance Coverage?

Car Insurance, Recent Articles

When you own a car, you know that auto insurance is essential. There are many benefits to having car insurance. No one expects to be in a car accident, but in the unfortunate event that you are you want to to have an auto insurance policy that has you covered. Vehicle repair costs, medical bills, and property damage expenses can quickly add up. Understanding the different types of auto insurance coverage can help you make the best decision about what types of coverage you should have in your policy. Depending on your needs not all types of auto insurance coverage may be necessary for you. One way you can save on your car insurance premium is to carefully choose only the coverage you need and avoid overpaying for coverage that isn’t necessary for your circumstances.

In this article, we will give a brief overview of the different types of auto insurance coverage to help you make the best decision on your car insurance policy coverage.

#1 Liability Coverage

Liability coverage is mandatory almost in every US state. Nevertheless, the minimum amount of liability coverage differs from state to state, so you will need to check what your state requires for coverage. This type of coverage helps you cover the costs for damage you might cause when involved in an accident. Therefore, liability coverage consists of two parts:

  • Property damage liability.
  • Bodily injury liability

Liability coverage comes into effect only if you are responsible for the accident.

#2 Collision Coverage

Collision coverage is optional. However, if you still owe money on your car, then your lender or leaseholder will most likely require you to have this type of coverage. Collision insurance coverage helps pays the cost to repair or replace your car if it’s involved in an accident with another vehicle, or an object such as a fence or tree. Moreover, if your vehicle is totaled in an accident, then collision coverage can potentially cover the depreciated value of the vehicle to have it replaced. Keep in mind that Collision Insurance has deductibles and limits which will affect not only the cost of your car insurance premium, but also how much money you will need to pay out of pocket before the insurance coverage kicks in.

#3 Comprehensive Coverage

Even though comprehensive coverage is optional, it can give you peace of mind in case of an accident. Many drivers get comprehensive coverage as a supplement to their collision coverage. This type of auto insurance will cover damage done to your vehicle from vandalism, theft, falling objects, earthquakes, storms, and even contact with animals. Comprehensive coverage has a deductible. If you choose a higher deductible, then your auto insurance premium will be decreased, but you will need to pay more money out of pocket before your insurance company will cover the repair costs. For example if you choose a $1000 deductible, and the repair costs to your vehicle are $5,000, you will need to pay $1,000 out of pocket and your insurance company will cover the remaining $4,000. Another thing to keep in mind when deciding on comprehensive insurance is the cash value of your vehicle, if it’s less than your deductible, comprehensive coverage may not be the right fit.

#4 Medical Payments Coverage

If you want to include insurance that covers the medical expenses of you, your family, and any other passengers in your car, you should include medical payments coverage in your auto insurance policy. This coverage will pay for the expenses related to any injuries sustained by you, your passengers, or family members driving your car – no matter who’s at fault. In more detail, medical payments will cover for the hospital visits, doctor visits, surgery, x-rays, among others. Even if you have health insurance, medical payments coverage can help eliminate coverage gaps. This type of coverage is optional in some states, while mandatory in others. Therefore, you will need to check what the law dictates for your state.

#5 Uninsured and Underinsured Motorist Coverage

Uninsured motorist coverage can help you pay for medical expenses or damage caused by a driver who is uninsured or underinsured. Many drivers in an attempt to save money don’t get enough car insurance coverage, thus being underinsured. Others might even be completely uninsured. If you get into an accident with one of these drivers, it can become very costly for you. However, uninsured and underinsured motorist coverage will help you cover the difference in cost between your bills and the other driver’s coverage, up to the limits of your policy.