All drivers driving in the U.S. are required by law to have auto insurance. In case of an accident, auto insurance can help you pay for your vehicle repairs and cover your medical bills. Car insurance will also protect you from financial ruin.
If you have never bought auto insurance before, it will be quite difficult to understand the different types of auto insurance. However, taking the time to familiarize yourself with the types of insurance coverage available today can be quite helpful. The good news is that car insurance is not as overwhelming as it looks.
Auto insurance companies often offer numerous basic coverage options for their clients. They also offer optional additions to enhance your protection. Below are the most common types of optional and standard coverage to choose from.
Liability Insurance
Liability means that a party is legally liable or responsible for something. In the case of auto insurance coverage, liability refers to the injuries and damages you can sustain or cause during an accident. There are two different types of liability in insurance policies; property damage and bodily injury.
Bodily Injury Liability
If you caused the accident, your bodily injury liability insurance would cover any injuries sustained and also extends to other individuals driving your car as long as they have permission from you.
Property Damage Liability
This policy is designed to cover any property damage you may cause another person due to an accident. In this case, property damage refers to the vehicle that you hit. However, property damage liability insurance can also cover other things such as buildings, fences, lampposts, and mailboxes.
If you hit your neighbor’s fence by mistake, you can use this coverage to pay for the resulting damages. Property damage liability insurance doesn’t cover any damages to your own property. You will need collision and comprehensive coverage to cover damages to your own vehicle.
Underinsured and Uninsured Motorist Coverage
This insurance coverage helps you cover your own medical expenses if you’re involved in an accident, and the other driver doesn’t have any liability insurance or enough liability coverage to pay for your injuries fully.
Underinsured and uninsured motorist coverage works like liability coverage. However, it’s designed to cover your damages instead of the other party’s.
This type of policy can also cover you if you were a pedestrian or you’re a victim of hit-and-run, and the driver is unidentifiable. Depending on where you live, this type of insurance may be mandatory or optional.
Vehicle Coverage
Apart from the mandatory liability insurance, it would be best to consider other optional auto insurance options for your car. This is especially advisable for new or more expensive cars. Vehicle coverage insurance is required by law, but your lender may also need it if you have a car loan or a lease.
Vehicle coverage insurance includes comprehensive and collision insurance. Ensure you talk to your insurance agent to help you decide between the two to see which is worth the cost. Remember to also do your research to find an affordable insurance policy based on your needs.
Below is an outline of these vehicle insurance types:
Collision Vehicle Insurance
If your vehicle sustains mechanical and physical damage, collision insurance will help you pay to fix the car. The policy will cover any damage your vehicle sustains after hitting a pothole, another car, or even a tree. However, if the accident was not your fault, the at-fault party’s liability insurance should pay for your vehicle’s repairs.
Collision insurance will only cover your car; it will not cover any damages sustained by the other party’s car. Moreover, this insurance doesn’t cover your car’s normal wear and tear or any mechanical failure.
Comprehensive Vehicle Insurance
Comprehensive coverage is also known as “other than collision coverage.” That’s because it covers specific damages that aren’t related to the collision. Some damages it covers include earthquakes, fires, floods, falling objects, explosions, and vandalism.
Thus, if you accidentally hit a deer, the resulting damage to your car will be covered by comprehensive vehicle insurance.
In most states, comprehensive insurance is optional. However, you will likely be required to have comprehensive coverage by lenders. You should also consider purchasing comprehensive insurance if your car is expensive or new.
Uninsured Motorist Property Damage (UMPD)
This is the best car insurance coverage to help you pay for property damages if your car is hit by a motorist who doesn’t have insurance coverage. Uninsured motorist property damage (UMPD) will typically cover the damage to your car but could pay for damage to property inside the car too. Such property may include car seats that sustain damage during an accident.
Most states necessitate that insurance companies offer their clients uninsured motorist coverage for property damage and bodily injury. However, you are allowed to decline the coverage in writing.
New Car Replacement Insurance
Do you have a car model that is one year old or newer? The insurance company may offer you new vehicle replacement insurance coverage. New cars depreciate very fast; without this insurance, you may not get enough money from a claim to upgrade your car to a newer model if it’s totaled.
A new car replacement insurance will help you pay the difference between the newer model’s cost and your car’s worth.
Now You Know the Different Types of Auto Insurance
There are many different types of auto insurance in the market today. Understanding these types will help you get the best auto insurance for your car based on your needs. Remember also to buy insurance from a reputable company to avoid being duped.
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