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If you haven’t shopped around for auto insurance in a while you may find it a bit confusing. There are countless providers to choose from and once you’ve narrowed your search down to a few companies, you still have to consider all the different types of coverage. When it comes to purchasing insurance, don’t let companies take advantage of you; know what you want in an insurance plan and what you’re willing to pay for it.
The 6 Types of Car Insurance
Car insurance is structured to protect you, your passengers and your car. Your auto insurance is a composition of six types of car insurance, namely, auto liability coverage, uninsured and underinsured motorist coverage, comprehensive coverage, collision coverage, medical payments coverage, and personal injury protection. When deciding what you want to include in your insurance bundle, be sure to understand your state’s minimum requirements and what each type of insurance includes.
This coverage is required by law in most states, so drivers must buy the minimum state-mandated coverage in this area. Auto liability insurance covers bodily injury liability and property damage liability. In other words, this type of insurance covers any injuries sustained by victims and passengers caused by you. Property damage liability pays out damage costs of a victim’s car or property if you caused the accident. For example, if you run into someone’s fence, then liability coverage would pay for its repairs.
Uninsured and Underinsured Motorist Coverage
Not every driver abides by the law or has appropriate insurance. Should you be involved in an accident with an uninsured motorist, then this type of coverage will pay for your medical bills along with those of your passengers. This only applies when you’re involved in an accident with a motorist whose car insurance does not cover all your medical bills. In addition to bodily injury coverage, this type of insurance may provide property damage coverage under certain conditions. Not all states require uninsured and underinsured motorist insurance.
Comprehensive coverage pays out when an animal or object damages your car or when theft or vandalism occurs. For example, it covers falling trees and accidents involving deer. This type of insurance can pay for repairs or the replacement of your vehicle. It comes with a deductible, which is an out-of-pocket expense. Comprehensive coverage is optional, but some lenders insist on having good coverage on leased cars with a deductible less than $500. You can click here for comprehensive insurance information.
When another vehicle hits your car, or you hit an inanimate object, collision coverage handles the car repairs or the replacement of your vehicle. For example, collision insurance covers the cost of car repair if you drive into a fence or mailbox. Many states do not require collision coverage, but many car lenders want anyone leasing a car to have the insurance and a deductible less than $500.
Medical Payments Coverage
As the name implies, this insurance type provides medical coverage for yourself, passengers, and family members who are permitted to drive your car should they be injured in an accident. For example, if your registered teenage son drives your car and is involved in an accident, they will be covered. It is a good option if you do not have health insurance or if your health insurance has a high deductible. Medical payments coverage, also known as MedPay, is required by law in some states and is optional in others.
Personal Injury Protection
Personal injury protection covers medical expenses after an accident, along with other expenses that are a result of your injuries such as transport fare, child care, lost income due to the accident, or even funeral costs. It is a no-fault insurance policy, meaning you will be covered regardless of who was at fault in the accident. Also known as PIP, personal injury protection is only required in some states.
Note that comprehensive and collision coverage are most important if you drive a high-value car. Without them, the repair costs could “total out” your vehicle, or, in other words, the insurance company declares your vehicle a total loss. If you own the car outright, you can lower your comprehensive and collision costs by opting for a high deductible. This option lowers your insurance premiums while ensuring that your high-value vehicle is protected from accidents and incidents.
Aside from the six essential types of car insurance discussed above, insurance providers may also offer:
- Roadside assistance
- Rental car reimbursement
- Mechanical breakdown insurance
- Gap insurance
- Ridesharing coverage
Let Your Requirements Drive Your Insurance
The type and combination of insurance that you should purchase depends on state law and your own needs. Speak to your insurance agent to understand the minimum coverage that you require for compliance with state laws and also your peace of mind. When shopping for car insurance, be sure to consider your budget, your risk profile, and your vehicle’s value.