Auto insurance can be a very complex subject, but it doesn’t have to be. Some people become overwhelmed immediately when selecting car insurance to get because of coverage options. Auto coverage is confusing for many consumers because they don’t understand what each coverage type offers, what that means for them, and how to choose between them.
Today, we will introduce the six primary auto insurance types. Not all auto insurance companies offer all six of these options, but the primary types that companies will give you as options are all covered below. Learn more about the coverage types, and it will become easier to choose which makes sense for your car, budget, and lifestyle.
Insurance Coverage Types
1. Liability Insurance
Liability insurance is one of the more straightforward and commonly known types of auto insurance that you could invest in. In the event that you are in a car accident, it is possible that the insurance companies and other involved authorities will decide that you caused the accident. If this happens, you will definitely want to have liability auto insurance.
This type of insurance covers the cost of property damaged in the accident if you are found liable. It also includes the cost of medical bills due to any accident-related injuries.
Liability insurance is required in most states, and most states also regulate the minimum amount of liability insurance coverage that you must carry through your auto insurance. Most drivers, though, choose to have liability insurance greater than the minimum because you will still be responsible for any costs over what your insurance doesn’t cover. Having a higher level of liability insurance protects you from having to directly cover accident costs if you are really found to be at fault.
2. Collision Coverage
The next option among auto coverage options is another commonly known coverage option: collision coverage. If in case, you are in an accident that involves another vehicle, collision coverage helps to repair your vehicle. If the cost of repairs would, in some way, exceed the value of the car, your coverage may even pay you the value of the car to help replace your vehicle.
Collision coverage is not required by law, but it may be needed if you have your car on lease or through another specific situation.
Do You Need Collision Coverage?
It can be really tough to decide whether or not you need to invest in getting collision coverage for your car. If you have an old car that doesn’t have a high value associated with it, having collision coverage may not be necessary. In the end, you would spend more money on the insurance coverage itself than it would ever pay out.
If you have a new car or one that costs a good chunk of money, collision coverage just makes sense. Any damage done to your car can be remedied quickly and effectively. In a way, this coverage protects the investment you made into the new car.
3. PIP and Medical Payment Coverage
Personal Injury Protection, also known as PIP Coverage, is an interesting type of auto insurance that most people choose to purchase when given the option.
With this coverage, medical bills for you and all passengers in your car will be covered up to the limit regardless of whether or not the accident was your fault. It may even cover some of your income if you are out of work because of the accident. While this coverage can be incredibly beneficial, it is not available in all states.
Some insurance companies offer a similar type of coverage known as medical payments coverage. This coverage helps defray medical costs after an accident.
4. Comprehensive Coverage
Certain situations can damage your car other than car accidents. While collision and liability insurance will protect you in cases of auto accidents, what will protect your car if it is damaged by the weather or stolen?
Collision and liability insurance would not cover either of those situations. Instead, you would need to have comprehensive coverage. Situations that fall outside of the bounds of a typical car accident may be covered by comprehensive coverage.
It’s safe to say that comprehensive coverage is more expensive than a liability or collision insurance, but it is beneficial in cases where you need your car to be protected in any situation. If you have anti-theft devices in your car, this type of coverage will be a little bit less expensive.
Still, this coverage is generally quite costly. If you consider your car to be easily replaceable, you likely do not need to have this specific coverage.
5. Uninsured Motorist Protection
Imagine this situation. You get into a car accident, and it is not your fault. The other drive is liable for the damages to your car. However, they are not properly insured, and their insurance will not cover the damages done to your car. What happens now?
If you have coverage known as uninsured or underinsured motorist protection, your insurance will pick up the remaining tab left over after this type of accident. It’s possible that drivers who carry state, minimum insurance may not have enough in their policy to cover damages done to you or your car.
Carrying uninsured motorist coverage can protect you in these situations. This type of insurance is not very expensive to add on to any of the other types of coverage that we talked about today, so it’s a good idea to add it to your coverage bundle.
6. Gap Insurance
It’s a known fact that cars depreciate significantly in value as soon as you drive them off of the lot. Even if your accident occurs only a few weeks after you purchase a brand-new car, your insurance settlement might not be enough to cover the purchase of a new car or the rest of a loan that had been used to purchase the car.
Sometimes, gap insurance coverage can help in these situations. This coverage helps to cover the amount owed on a loan when your car is totaled and may assist in other situations, too.
Explore Your Options
Every auto insurance company has their own types of coverage policy and even a different variety of options. Before you lock in your insurance coverage bundle or company selection, explore the different auto coverage types available to you.
Regardless of what your budget is, there are auto insurance options that will make sense for your car and living situation. Choose wisely, and remember that you can usually add additional coverage later on if you decide that you want it.