The most common types of car insurance coverage include liability, collision, personal injury protection, uninsured and underinsured motorist, full and medical payments. When buying a new policy or reviewing your existing one, it’s important to understand how each can protect you when comparing quotes.
6 Common Types of Car Insurance Coverage
When purchasing an auto insurance policy, there are six main types of coverage to choose from. Here’s a description of each to help you decide which is right for you.
1. Liability coverage
With the exception of New Hampshire and Virginia, all states require licensed drivers to maintain liability coverage. Why? Because it helps protect other people on the road. If you cause an accident, your liability coverage kicks in to pay for the injuries and damages you cause to someone else, up to your policy limits.
Without it, you could be responsible for covering the cost of medical bills and repairs in the pocket. Additionally, you could face fines and other penalties for driving without insurance. Also, when selecting liability limits for your policy, keep in mind that your state’s minimum requirements are likely not high enough to cover injuries and damages after a serious accident. That’s why opting for higher limits offers better protection.
2. Collision coverage
Collision coverage is optional in all 50 states. However, if you have an auto loan or lease, your lender or leasing company will likely need it.
- Accidents with other cars. When you have an accident with another vehicle, collision coverage pays for repairs to your car until its actual cash valueno matter who is at fault.
- Hitting stationary objects. If you hit a fixed object like a fence or garage, the collision pays the damage.
- Repair costs exceed value. If the cost to repair your vehicle exceeds its current fair market value, the insurer will declare it a total loss. If this happens, the company will give you a check for the actual value of the car, and you can use the money to purchase a new vehicle.
3. Bodily Injury Protection Coverage
Personal Injury Protection (PIP) is mandatory in some states and optional in others. So, be sure to check your state’s requirements.
Coverage under PIP varies by state. This may include payment of medical bills, lost wages and funeral expenses for you and your passengers.
4. Protection of uninsured and underinsured motorists
Although almost all states require drivers to have liability insurance, many people drive without it. According to Insurance Research Councilit is estimated that one in eight drivers in the United States were uninsured in 2019.
Uninsured and Underinsured Motorist (UM/UIM) coverage helps pay for accident-related expenses. This coverage kicks in if you are hit by an uninsured driver or a driver whose policy limits are too low to cover your bills.
Some states require drivers to have UM/UIM coverage, while others do not.
5. Full coverage
Back to back insurance coverage protects drivers against damage that is not caused by a collision, unless the collision occurs with a deer. It helps protect against weather, fire, theft, vandalism, animal damage, etc.
Like collision, comprehensive coverage is optional in all states. However, if you have a loan or lease, your lender or tenant will likely need it.
6. Medical payments
Medical expense coverage can help pay for you and your passengers for medical expenses or funeral expenses after an accident. However, unlike personal injury protection, this optional coverage generally does not cover lost wages.
Additionally, medical payments can help pay for treatment if you are injured as a passenger in someone else’s car. It also covers payments if you are hit by a vehicle as a pedestrian.
Medical payment coverage has no deductibles or co-payments. But policy limits are usually much lower than personal injury protection limits.
Other Types of Car Insurance Coverage
Many insurance companies offer optional Additional modules to protect you in specific situations. Common selections include:
Rental Reimbursement Coverage/Freight Cost Coverage
With rental car reimbursement, the insurer covers the cost of a rental car if your vehicle needs to be repaired due to a covered loss. However, the reimbursement amounts are not unlimited. Insurance companies usually pay a specific dollar amount per day up to a certain number of days.
BPA coverage helps pay the difference between what you owe on your car loan or to rent and the actual cash value of your car if totaled at a covered event.
New car replacement cover
When an insurance company declares a car a total loss, they usually issue a check for its current market value. However, if you have new car replacement coverage, the insurer will cover the cost of a new vehicle. You must be the original owner of the car to purchase this type of coverage. It is usually only valid for about a year after the purchase of a vehicle.
Towing and labor coverage
Sometimes known as roadside assistance, towing and labor coverage can help cover your costs if you need a tow, run out of gas, get locked in out of the car or if you have a flat tire.
Your personal auto insurance policy will not cover you while driving for a ride-sharing company. Ride-sharing companies typically maintain insurance that covers drivers when carrying passengers. But if you’re expecting a tariff, neither policy will protect you. Carpooling coverage can help fill the void.
PA System Coverage
Standard insurance policies generally have low limits for custom equipment. If you are installing custom AV equipment, audio system coverage can provide additional protection in the event of damage or theft.
Classic car insurance
If you have a classic or vintage automobile, you need more than standard auto insurance to protect it. Traditional auto insurance provides specialized coverage for vintage vehicles. But, you usually have to meet certain conditions to qualify. So be prepared to limit the number of miles you put on your classic car and keep it in storage when you’re not driving it.
In fgeneral, full coverage refers to a combination of liability and property damage coverage, including collision and comprehensive. But remember that no one type of insurance can protect you from every accident you might encounter.
How to choose the right cover
Determine how much car insurance you need, it’s a good idea to look at a few different factors. First, you’ll want to take a look at your financial situation. Experts often recommend having liability limits at least equal to your assets to protect your finances if someone sues you after an accident.
For example, you may need to use your savings to pay for medical expenses and accident-related damages if you don’t have enough coverage.
Another factor to consider is the cost of your vehicle. For example, if you can’t afford to repair or replace it, maintaining collision coverage can help you get back on the road if it’s damaged in an accident. And if you live in an area where inclement weather is common or where rates of theft and vandalism are high, comprehensive coverage will help protect you.
Where to buy car insurance
Buying car insurance is quite simple. But it’s a good idea to get several quotes from different insurers so you can compare prices and coverage options. You can get a quote over the phone, online or in person from three main sources:
- Insurer. Purchasing coverage directly from the insurer is quick and easy. However, if you want to compare options, you will need to contact each company separately.
- Broker. Brokers work with several different insurance companies, which makes it easy to compare coverage and prices from different insurers. Brokers can help you evaluate other policies to determine which best suits your needs.
- Captive agent. Captive agents work for a single insurer. They can help you explore the different types of coverage offered by a single insurance company and act as a point of contact if you take out a policy. Unfortunately, they cannot help you compare policies from different companies.
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