The 7 Types of Car Insurance Coverage: Which is Best For You?

By Chika

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Last Updated: May 7, 2022

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Car insurance coverage is required by law for almost all drivers in the United States. Auto insurance can protect you from financial ruin, pay for car repairs, and cover medical expenses if you are involved in an accident.

Understanding the basic forms of coverage might be beneficial if you have never purchased vehicle insurance before. Multiple types of coverage are included in a single vehicle insurance policy, and it is critical to understand each one.

Car insurance, fortunately, is not as complicated as it may appear.

When you purchase a vehicle insurance policy, you will be required to choose the coverages you want and how much of each type of coverage you want. Most states, however, have specific regulatory requirements for the minimum amount of coverage one must carry.

This implies you won't be able to buy a policy that is below the minimum needed coverage limits allowed by the state. 

 

The 7 Most Common Types of Car Insurance Coverage

Here is a list of common types of auto insurance coverages:

1. Liability insurance

You are legally accountable for something if you are liable. Liability in the context of automobile insurance relates to the damages and injuries you cause during a car accident. Standard vehicle insurance plans cover two categories of liability: physical injury and property damage.

 

2. Bodily injury liability

If you cause an accident, your bodily injury liability coverage will pay for the other party's injuries, including medical bills, lost earnings, and pain and suffering. As long as they have your consent, everyone driving your car is covered.

If you rear-end another vehicle and the driver has a broken leg, your bodily injury liability coverage would cover x-rays, surgery, and other medical treatment, as well as time off work. Most states have a minimum level of bodily injury liability coverage that you must carry.

 

3. Property damage liability

Property damage liability insurance is intended to cover any damage you may do to another person's property as a consequence of an automobile accident. This usually refers to a car you strike. But, it may also relate to other things like fences, buildings, mailboxes, or light posts.

This is the policy that would pay for damages if you accidently hit a pole or run into your neighbor's mailbox.

Property damage liability does not cover damage to your own property. Optional comprehensive and collision coverages are required to cover damage to your own vehicle.

Although some motor insurers may give a minimal amount of personal property coverage for goods in your vehicle, you will normally need a homeowners, renters, or condo owners insurance to cover personal property that you may have in your vehicle, such as a laptop or household furnishings.

 

4. Uninsured and underinsured motorist coverage

This policy pays for your medical bills if you are hit by another driver who does not have liability insurance or does not have adequate liability insurance to cover your injuries.

This sort of insurance compensates for damages if you, another covered driver on your policy, or someone you've let borrow your car is hit by an underinsured or uninsured motorist.

Uninsured and underinsured motorist coverage is similar to purchasing a liability policy to protect yourself from uninsured drivers. It's similar to liability coverage, except it's meant to compensate for damage to your own car.

Uninsured and underinsured motorist coverage also covers you while you are:

  • a pedestrian or
  • the victim of a hit-and-run where the at-fault driver is at fault

Depending on the regulations of your state, uninsured and underinsured motorist coverage may be optional or mandatory,

 

5. Collision

This is the coverage that covers for the repairs to your automobile if it is damaged in an accident. Collision coverage can protect your car from damage caused by hitting another vehicle, a pole, a tree, or even a pothole. 

If you were not at fault for an accident that damaged your automobile, the at-fault driver's property damage liability policy should reimburse the costs of your repairs. Collision coverage, on the other hand, only applies to your vehicle and excludes damage to the other driver's vehicle.

Furthermore, collision coverage does not cover mechanical failure or issues from the wear and tear on your car. If your gearbox, for example, fails, you won't be able to utilize your collision insurance to repair it. 

This coverage is typically optional unless you have a loan or lease on your automobile. However, you might want to consider purchasing this very affordable policy to cover the cost of repairing or replacing your car in the case of an accident.

 

6. Comprehensive Coverage

Comprehensive coverage, sometimes known as, "other than collision coverage," covers for a variety of damages that aren't caused by an accident. These events, for example are all covered. 

  • Fires
  • Earthquakes
  • Floods
  • Vandalism
  • Theft
  • Striking a deer
  • Falling trees and other objects
  • Explosions
  • Windshield breaking

As a result, if your car spontaneously catches fire on the road or if you leave it outdoors during a hail storm, your comprehensive coverage may cover the costs.

Comprehensive coverage is usually optional. If you have a loan or lease on your vehicle, you will likely be required to carry comprehensive coverage by your financial institution. If your vehicle is newer or expensive, adding comprehensive to your policy would give you peace of mind.

 

7. Uninsured motorist property damage (UMPD)

If you are hit by someone who does not have insurance, uninsured motorist property damage (UMPD) coverage will pay for your property damage. This will often cover damage to your vehicle. It may also cover damage to things within your vehicle, such as a car seat damaged in a collision with an uninsured motorist.

Uninsured motorist coverage is required in many states for both bodily injury and property damage, although you may usually decline it in writing. On the other hand, UMPD is not offered in all states. Even if it is, there may be a modest deductible.

If you are unable to obtain UMPD, speak with your insurance agent or vehicle insurer on how to handle an uninsured motorist property damage claim. Using your collision coverage, many firms are able to take care of your damage.

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Selecting the Best Car Insurance Coverage 

Most states have specified minimum liability coverage requirements that drivers must adhere to. These requirements are denoted by three digits, such as 25/50/10 insurance coverage. 25 indicates that the maximum amount that can be awarded for one person's physical harm per accident is $25,000 in this example. 

The second number is the maximum compensation per accident, which in this case is $50,000. The third section deals with maximum property damage compensation, which in this case is $10,000.

State minimum coverage might help you save money on insurance. It can also put you in a financial bind if you are at fault in an accident. You must pay the difference out of pocket if you cause an accident and the damages exceed your insurance limits. 

Furthermore, state minimum coverage may not include medical expenses or personal injury protection (PIP) coverage, as well as covering for damage to your own car. To fill out your insurance, you might want to consider increasing your liability limits or purchasing full coverage, as well as adding additional extra coverages.

 

Knowing the Differences in Car Insurance Coverage Can Save you Time & Money

Shop around and compare different car insurance coverage types and costs offered by different providers. This is one of the greatest methods to get the correct one for you.

Speak with a qualified agent or a customer service representative about your coverage needs. You'll receive prices for different levels of coverage.

Photo by Clem Onojeghuo on Unsplash

 

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