What Do the Different Auto Insurance Coverage Types Mean?
Before you can take your vehicle out on the road, you absolutely have to have car insurance coverage. But the different types of car insurance that are available can be confusing - there are actually no fewer than seven different types of car insurance that you can choose from, and you have to make sure that what you're buying fits your vehicle, your lifestyle, and your budget. Here's what you need to know.
Liability insurance is the bare minimum that's going to be required. If you should happen to be in an accident that's your fault, your liability insurance will cover any damage to property that you caused, along with the medical bills incurred by the injured parties. Most states require a minimum level of liability insurance, but it makes sense for you to carry more liability insurance if you can. You don't want to end up having to pay out of pocket. If you have significant assets, you should increase your liability insurance proportionally, since in the event of a lawsuit, your assets could be seized.
In the event of an accident, if you have only liability insurance, you'll end up having to pay to repair your vehicle. With collision insurance, the insurer will pay for the repairs, and even cover the replacement value of your car.
You're not required by law to carry collision insurance, and if you're driving a "for now" car that you plan on scrapping when it becomes too expensive to maintain, you may not even want to bother with collision insurance. If your vehicle is worth a lot of money, though, you should consider collision insurance unless you have very deep pockets and don't mind gambling that you won't have to replace your car.
Your liability insurance and your collision insurance only cover accidents. Comprehensive insurance is what covers you against other damage - for instance, if you hit a deer (which isn't considered to be a collision) and write off your car, your comprehensive insurance covers that damage. If a tree falls on your car, it's damaged in a flood, or even if your psychotic ex takes a baseball bat to your windshield, you're covered.
Comprehensive coverage can be expensive, and like collision insurance, it may not be worth it if it will be fairly easy for you to replace your vehicle. Anti-theft devices can reduce the cost of comprehensive insurance on more valuable vehicles.
Uninsured Motorist Protection
The law requires motorists to carry insurance. Of course, that doesn't mean that everyone obeys the law. If you're involved in an accident that's caused by an uninsured driver, you could be out of luck. Of course you can always sue the driver to recover damages, but what if that driver has no assets? An uninsured motorist policy can protect you even if the other party has no auto insurance and no assets that can be seized.
Medical/Personal Injury Insurance
In the event of a car accident, medical bills can be astronomical. With medical / personal injury insurance, no matter who's at fault, your medical bills and those of your passengers will be covered. That said, this may not be the most desirable type of auto insurance. Most of the time your general health insurance policy will cover you, so if you're a careful driver who doesn't go around causing accidents that injure other people, your general health policy should be your first choice when it comes to accident coverage. It's considerably less expensive.
This type of auto insurance covers you regardless of who's at fault, but it's only available in twelve states. This type of car insurance coverage can be expensive, so ideally, you should consider other options, particularly if it won't cost you all that much out-of-pocket to replace your vehicle.
This type of car insurance coverage is available for people who are making car payments, and who still have to make payments on the vehicle even if it's destroyed in an accident. It's a good choice if you wouldn't be able to easily pay off the amount still owing on your vehicle if it should be totaled in an accident. You may already have this type of car insurance coverage- some lenders require it.
Now you know about the different types of car insurance that are available to you. Decide which type of car insurance coverage is best, and shop around for a good rate.