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What Are The Different Types of Car Insurance?

Admin May 7, 2021

0 17 4 minutes read

Each type of car insurance covers something different. Some cover property damage, other types cover injury, and a few cover theft. What car you drive, the area you live in, and any other types of insurance policies you have already purchased will come into play when deciding on what type of insurance you should get.

Here are some of the most common coverage types:

Liability coverage
Uninsured and underinsured motorist coverage
Comprehensive coverage
Collision coverage
Personal injury protection
Medical payments insurance
Guaranteed auto protection
Rental reimbursement
Emergency roadside assistance
Classic car insurance

Liability Coverage

Almost all states require some liability coverage, but as requirements can vary it is important to know what your state requires. Liability insurance covers injury and damage to other people and their property when you’re considered at fault for the damages, according to 21st Century Insurance.

There are two types of liability coverage:

Bodily injury: This coverage pays for the medical costs for others that you have injured in a traffic accident. You and anyone else listed on your insurance as a driver will be covered by this type of protection.
Property damage: This type of liability coverage repairs or replaces cars or property like fences and mailboxes after an accident.

Your liability limits are the maximum that your insurance provider will pay for injury and damages to other people. Once you reach these limits, you must pay the remaining costs out of pocket.

Uninsured and Underinsured Motorist Coverage

According to Allstate, uninsured motorist coverage pays for your medical costs and repairs to your car when you’re in an accident with a driver who doesn’t have insurance. Underinsured motorist coverage pays out when the at-fault driver’s auto insurance limits don’t cover the full cost of your repairs or medical bills. Uninsured and underinsured coverage is a part of some state’s minimum requirements.

Uninsured motorist coverage is only applicable if you are not-at-fault. Some states require someone to be considered legally at-fault for this type of coverage to pay-out, while other states are no-fault states and do not consider any drivers legally at-fault for an accident. Check with your state laws to determine if uninsured or underinsured motorist coverage will help in your area.

Comprehensive Coverage

According to Nationwide, comprehensive insurance covers events considered out of the driver’s control like weather damage, theft, striking an animal, and vandalism. Comprehensive coverage usually has a deductible that you must pay out of pocket before your insurance will begin to cover costs.

Consider these factors when determining if comprehensive coverage is for you:

Vehicle age
Vehicle mileage
The car’s actual cash value
The cost of premiums for your age group or location
How likely your vehicle is to get stolen or vandalized
Whether you live in an area with frequent natural disasters or extreme weather
Your ability to pay for repairs or vehicle replacement out of pocket

Each of these criteria will help you determine if comprehensive coverage makes sense. If you can cover costs out of pocket, you probably don’t need comprehensive insurance. If your vehicle has a high value, then your monthly costs will increase. For example, when you park your car in a locked garage, the chances of your vehicle being stolen or vandalized are quite low and you may never use your coverage.

Collision Coverage

Collision insurance will help pay for repairs or vehicle replacement when you are in a traffic accident with another vehicle or when you strike a static object like a tree or a curb, according to WalletHub. With this coverage, insurance companies payout up to your car’s value at the time of your accident minus your deductible.

If you have a newer or a generally high-value car, collision insurance can help you get back to where you were financially before the damage occurred. If your car is older, losing value quickly, or close in value to your deductible, collision coverage may not be worth it in the end.

Collision coverage is optional in most states and is included in full coverage auto insurance policies, although some leaseholders or lenders may require you to purchase collision insurance.

Personal Injury Protection

According to Investopedia, personal injury protection will help pay for medical bills after a traffic accident. Personal injury protection insurance may also pay for costs related to or caused by your injuries, such as child care or loss of income. Some states include personal injury protection as a part of their mandatory minimum auto insurance requirements.

Medical Payments Insurance

Medical payments insurance, or MedPay, covers medical costs after a traffic accident, like surgeries, hospital stays, and x-rays, regardless of fault. MedPay is often compared to personal injury protection, but the largest difference between these two types of coverage is MedPay does not pay for home services or lost wages.

Guaranteed Auto Protection

Also known as gap insurance, guaranteed auto protection covers the amount of money you owe on a lease or loan if it exceeds the vehicle’s actual cash value. When your car is totaled or stolen, your comprehensive or collision coverage will only pay for the car’s current value, which may be less than what’s left on your lease or loan. Gap insurance pays for the remaining balance on your loan that comprehensive or collision coverage doesn’t cover.

Rental Reimbursement

Rental reimbursement pays for the cost of a rental vehicle during repairs or replacement of your insured vehicle. These policies include limits to how much the insurance company will pay per day or claim, although these limits are generally enough to cover you entirely until your car is out of the shop.

Emergency Roadside Assistance

Emergency roadside assistance will unlock your car, jump start a dead battery, repair a flat tire, or refuel your vehicle if you have run out of gas. If your car needs to be towed, emergency roadside assistance will tow it up to a mileage limit, either to a repair shop or your home.

Classic Car Insurance

Classic car insurance covers a particular type of vehicle. These cars must be considered vintage, classic, or antique to be covered under these plans. Each company has its own definitions of what makes a car classic.

Insurance brings you peace of mind and the knowledge that your finances won’t be largely disturbed when you, your car, or another person or their property is damaged in a traffic accident. Go online to find what insurance works for you, or talk to an insurance agent based in your location to get the best rates.