Important Types of Car Insurance Coverage
Fortunately, there are some aspects of car insurance coverage that are fairly standard across most providers. Optional coverage options can also be used to supplement your policy or provide you with additional financial protection in the event of an accident or other related incident.
Understanding the various types of coverage available and determining what you may require is an important step before finalizing your policy. After all, drivers in the United States spend approximately 2.57% of their annual income on auto insurance, so selecting the right coverage may be critical to getting your money’s worth from your policy.
Liability, collision, personal injury protection, uninsured and underinsured motorist, comprehensive, and medical payments are the most common types of car insurance coverage. When comparing quotes for a new policy or reviewing an existing one, it’s critical to understand how each can help protect you.
Types of Car Insurance Coverage
Liability Coverage
To be liable means to be legally accountable for something. In the context of car insurance, liability refers to the damages and injuries you cause in the event of a car accident. Standard auto insurance policies cover two types of liability: bodily injury and property damage.
Most US states require liability insurance as a legal requirement for driving a car. Liability insurance may assist in covering damages for injuries and property damage caused to others as a result of a covered accident.
Without it, you may be forced to pay for medical bills and repairs out of your own pocket. Furthermore, driving without insurance may result in fines and other penalties.
Also, when deciding on liability limits for your policy, keep in mind that your state’s minimum requirements are unlikely to cover injuries and property damage in the event of a serious accident. As a result, choosing higher limits provides more protection.
Bodily Injury Liability
If you cause an accident, your bodily injury liability coverage will cover the other party’s injuries, including medical expenses, lost wages, and pain and suffering. As long as they have permission, anyone driving your vehicle is covered.
For example, if you rear-end another vehicle and the driver sustains a broken leg, your bodily injury liability coverage would cover x-rays, surgery, and other medical care, as well as time away from work. Most states have a minimum amount of bodily injury liability that you must carry.
Property Damage Liability
Property damage liability is intended to cover any damage to another person’s property as a result of an auto accident. It usually refers to a vehicle, but it can also refer to other objects such as fences, buildings, mailboxes, or lamp posts. Homeowners, renters, or condo owners’ policy is usually required to cover the personal property inside your vehicle.
Vehicle Coverage
In addition to the necessary liability insurance, you might want to think about collision and comprehensive insurance for your car, especially if it’s newer or more expensive. These insurance policies are not required by law, but if you have a loan or lease on your car, your lender probably will.
Collision
If you collide with another car, a pole, a tree, or even a pothole, collision insurance can pay for the damage to your car.
If the cost of repairs exceeds the vehicle’s current fair market value, the insurer will declare it a total loss. If this occurs, the company will issue you a check for the car’s actual cash value, which you can use to assist in the purchase of a new vehicle.
Comprehensive
Comprehensive insurance can provide additional coverage in the event of a collision with another vehicle. It may help pay for damage to your car caused by incidents other than collisions, such as vandalism, certain weather events, and animal accidents.
Uninsured Motorist Property Damage (UMPD)
Uninsured and underinsured motorist coverage contributes to the payment of accident-related expenses. This coverage kicks in if you are hit by an uninsured or underinsured driver whose policy limits are insufficient to cover your expenses.
Personal Injury Protection (PIP)
Personal injury protection (PIP) pays for injuries to you and anyone else in your car, regardless of who caused the accident. PIP may cover medical and rehabilitation costs, as well as funeral costs. If you are unable to complete tasks due to injuries sustained in an accident, it may also cover work loss benefits or other non-medical expenses.
Medical Payments Coverage (MPC)
Medical payments coverage (MPC) pays for injuries sustained by you and any passengers in your vehicle in the event of an accident. It only covers medical bills resulting from car accidents. It does not usually cover things like lost wages. MPC may also cover you if you are a pedestrian who is hit by a car. Your MPC has a cap, which is the most money the insurance company will pay you for medical expenses.
Gap Insurance
Gap insurance covers the difference between the depreciated value of your vehicle and the loan amount. According to Triple-I, gap insurance offered by lenders is typically much more expensive than gap insurance purchased from your auto insurer. Gap coverage may be available for a brand new vehicle or one that is up to two model years old.
New Car Replacement
Your auto insurer may provide new car replacement coverage if you own a vehicle that is one model year or newer. New vehicles depreciate quickly, and without this coverage, you may not be able to replace your vehicle with a new model if it is totaled. The new car replacement endorsement is intended to pay the difference between the vehicle’s value and the cost of purchasing a comparable new car.
Towing and Labor Insurance
Most auto insurers provide towing coverage, which is almost always optional. Roadside assistance, also known as towing coverage or emergency roadside service, covers tows and service calls. If your vehicle breaks down on the side of the road, or if you need a tire changed or gas delivered to you, this coverage may pay the bill up to the coverage limit, which is usually a dollar amount but can be classified by the number of miles a service technician must drive to reach you.
Rental Car Coverage
It can be costly to figure out how to get around after an accident. Rental reimbursement insurance pays for a rental car if your vehicle is unable to be driven following an accident.
Classic Car Insurance
You need more than standard auto insurance to protect a classic or vintage vehicle. Traditional auto insurance covers vintage vehicles with specialized coverage. However, in order to qualify, you must usually meet certain criteria. So, be prepared to limit the number of miles you put on your classic car and store it when not in use.
