Understanding the Different Types of Auto Insurance Coverage

Car insurance is an absolute must, yet understanding its various forms can be confusing. By understanding each form of auto coverage available to you, it will allow you to tailor a policy tailored specifically to meet your needs and budget.

Liability insurance coverage, including bodily injury liability and property damage liability, is typically required in most states. To secure maximum protection it’s advisable to purchase higher limits than state minimums.

Liability

Liability insurance covers other parties’ costs associated with an accident that you cause, such as injuries and property damage. Most states mandate it by law; minimum limits vary widely across jurisdictions.

Body Injury Coverage typically comprises three separate parts, such as bodily Injury per Person Limit, Body Injury per Accident Limit and Property Damage Limit. Bodily Injury coverage will cover medical expenses of policyholder and their passengers in an accident as well as legal fees in case they are sued; while Property Damage coverage will cover costs related to repairs or replacement for other vehicles, fences or mailboxes damaged during an incident.

To cover damages to your own car, collision and comprehensive insurance are needed – these policies typically form part of a full coverage policy and often also provide PIP or uninsured/underinsured motorist coverage. Lenders typically require this form of coverage as part of financing agreements.

Collision

Collision insurance helps cover repairs after an accident with another vehicle or stationary objects like fences or highway dividers, or it can replace it in total if one was caused by you. Coverage typically limits itself to actual cash value of your car less any applicable deductible; and is usually required by lenders who finance or lease vehicles.

Collision insurance can typically only be obtained when purchased in conjunction with comprehensive coverage, commonly referred to as “full coverage”. Unfortunately, full coverage insurance isn’t mandated by any state laws and might not justify its additional cost if driving an older vehicle; to find out whether collision coverage makes financial sense for you it’s best to estimate its value against your collision premium costs.

Comprehensive

Comprehensive vehicle coverage offers your car extra protection from events other than vehicular collision. These may include hail storms, theft or vandalism incidents and natural events like hurricanes or tornadoes. Your insurer will determine whether repairs can be made or if it should be considered total loss; typically this amount equals its actual cash value minus your deductible amount.

Comprehensive vehicle coverage isn’t mandatory in any state, though your lender may require it if leasing or financing your car. When considering comprehensive coverage as an option for yourself, be mindful of both costs associated with deductible payments as well as depreciation to determine its relevance; generally speaking, purchase comprehensive only when your car is relatively new and of high value.

Uninsured/Underinsured Motorist Coverage

Uninsured motorist coverage (UM) provides medical bills and expenses related to an accident with a driver who lacks car insurance or who only carries minimum required liability limits but doesn’t cover you after an incident occurs.

Underinsured Motorist Coverage (UIM) offers protection when involved in a car accident with someone whose insurance limits do not fully cover vehicle damages and bodily injuries incurred from being hit by them. While available as standalone coverage in some states, in others it can be included within liability policies; our agents can help determine which options may best meet your needs.

Other Optional Coverage

Some insurance providers provide extra coverage types, like towing and labor or extended transportation coverage (rental reimbursement), that may be useful to drivers. These options often come along with comprehensive and collision policies.

Personal Injury Protection (PIP) covers medical bills for you and your passengers in an accident regardless of who caused it, funeral costs, replacement services for tasks you can no longer do due to injuries (like cleaning or child care) which are unavailable due to said injuries and funeral costs associated with them (it is mandated in states with no-fault systems). PIP must be purchased in such states.

Comprehensive car coverage, often coupled with collision coverage, provides protection for damage resulting from sources other than collision, including fire, flood, vandalism, certain weather events or theft. Although comprehensive coverage is usually optional for vehicle loans or leases, lenders often mandate it.

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