It’s always wise to understand the most common types of car insurance coverage options you have at your disposal when shopping for policies or reviewing your existing one. All insurance coverage types are made to protect drivers on the road.
Still, different car insurance coverage options provide different levels of protection.
Whether you’re driving to work, around town or going on a road trip, you need car insurance. Most drivers pay attention and drive carefully while on the road. But accidents do happen. If you don’t have car insurance, expect to pay for damages out of your pocket. Some states also hit uninsured drivers with hefty fines and other penalties.
Car insurance acts as a safety net, protecting drivers. It helps them avoid paying more if an accident happens. Learn more about the most common types of car insurance coverage. Armed with this information, you will know how to choose the best coverage for your car.
5 Common Types of Car Insurance Coverage
Find out the different types of common car insurance coverage to determine what’s right for you and your vehicle.
1. Liability Coverage
Why do you need liability coverage? For one, it is obligatory in almost all states. Moreover, if you cause a car accident, liability coverage will protect you and your vehicle.
So, what are the benefits of liability insurance coverage? The benefits are:
- Property damage: Liability insurance will cover some, if not all, of the replacement or repair costs associated with damage caused to the property of a third party involved.
- Bodily injury liability: Your policy may cover all of the medical bills for hospitalization and treatment resulting from the car accident, of course, within the coverage limits you have picked.
Car owners in all states except New Hampshire and Virginia must buy minimum liability insurance. If you don’t, you will need to cover the cost of the damage caused by the accident out of pocket plus be subject to fines and other penalties.
But, is minimum liability insurance enough to pay for everything? Well, this really depends on the policy you choose. When you choose a higher rate of coverage, you can reduce your personal expenses in case an accident occurs.
2. Collision Coverage
Collision coverage is optional with most insurance policies. But, if you bought your car with a loan or through a lease, you may be required to purchase it by your lender or leaseholder for the length of the lien.
If you get into an accident with another motor vehicle, collision coverage can help to pay for the replacement or repair of your car. This type of coverage will also cover the damage done to objects, such as fences, that you could hit while driving.
If the repair of your car is estimated to cost more than its current market value, you will receive a check for the current market value of your car from the insurance company.
When buying a brand new vehicle, make sure to include collision coverage in your policy.
3. Personal Injury Protection Coverage
Personal injury coverage can help you deal with many risk factors. It will cover your medical bills and those of other passengers regardless of fault.
Do you drive a lot with your family or friends? This coverage can protect you and them from job income loss and other expenses.
Check your state’s insurance requirements for personal injury protection coverage to know if this type of insurance is mandatory or not. For example, in Florida and New York, “no fault” laws require drivers to carry minimum coverage.
4. Uninsured and Underinsured Motorist Protection
Uninsured motorist insurance will protect you in an accident with a driver who doesn’t have liability insurance. Also, this coverage steps in if the other driver’s coverage limits are too low to pay the resulting medical expenses.
If you have this additional coverage, the insurance company will pay for damages and any medical bills. By including this protection, you can minimize your expenses.
Helpful tip: Most times, it’s very cheap to add uninsured/underinsured motorist protection to your policy. So, consider it.
5. Comprehensive Coverage
Why would you want to add this coverage to your policy? Comprehensive insurance coverage protects drivers against many dangers.
The main advantage of this insurance type is that it covers a variety of dangers outside the scope of vehicle collisions.
According to the Insurance Information Institute, risk factors comprehensive coverage covers include:
- Floods and other weather damage
- Vandalism and riots
- And more
If you live in an area prone to hailstorms, comprehensive coverage will pay for the damage these types of weather events can cause. This type of coverage also protects you if an accident happens with a deer.
Although drivers often regard comprehensive insurance as too expensive, it can actually fit your budget. For example, opting for a higher deductible will help lower actual costs of this type of coverage.
In most states, comprehensive coverage is optional. But if you are leasing or paying off your car, your lender might require that you purchase it.
What’s the Difference Between Comprehensive and Third-Party Property Damage Insurance?
What is the main difference between comprehensive and third-party property damage insurance? The answer lies in the protection they offer you.
After an accident, comprehensive coverage will cover any damage to your car and the other cars and property involved. A third-party policy will not cover the damage to your own car. It will only cover the damage to other cars and property.
Because it provides more protection, comprehensive coverage tends to be more expensive than all other coverage options listed.
What Is Third-Party Property Damage Insurance?
Third-party property damage insurance doesn’t cover the damage to your car. It only covers the damage you cause to other property and automobiles. You can add additional third-party property damage coverage, but your options will be quite limited. It’s best to ask your insurer for more details.
Other Types of Car Insurance Coverage
Most insurance companies will offer some of the following voluntary coverage.
These other insurance options will cover everything from car rental reimbursement to classic car insurance coverage. Check around and ask your insurance agent for more information on these seven additional types of car insurance coverage.
- Rental reimbursement coverage/transportation expense coverage
- Gap coverage
- New car replacement coverage
- Towing and labor cost coverage
- Ride-sharing coverage
- Sound system coverage
- Classic car insurance
Now you’re ready to take the wheel. Hopefully, this article was helpful. If you are ready to find out how much additional car insurance coverage options could cost you, begin with a free quote.
It’s prudent to check around and obtain at least three car insurance quotes before you finally settle on the right insurance coverage costs for you and your finances.