The 7 Different Types of Car Insurance and What it Covers
It’s that time of the year again when you’re due to buy or renew your auto insurance policy. Maybe you just got a new car or driving your own car for the first time. Nevertheless, it’s important to do some research before buying vehicle insurance. Everyone knows that car insurance is meant to compensate damages in your car due to accident or theft. Let’s say you had a collision with another vehicle that was driving on the wrong side of the road. As a result, you sustained serious injuries from the accident. The type of vehicle insurance you have will determine if you’re eligible for claims on your medical bills and car repair.
There are different types of car insurance, each with their own coverage. Some states require you to own a specific type of auto insurance. We have listed down the basic types of car insurance and their coverage so you can choose the best one for you.
1. Liability Coverage
Owning a minimum amount of liability coverage is mandatory in every US state except New Hampshire. This type of insurance pays for damages and injuries to the other party sustained from a car accident you’ve caused. There are two kinds of liability coverage: bodily injury liability which pays for medical costs of the other party who were injured and property damage liability which covers costs to another person’s damaged property during the accident.
2. Comprehensive Insurance
Comprehensive insurance covers damages due to natural disasters, fire, theft, vandalism, civil disturbance and damages caused by animals. This type of insurance comes with a deductible, which means an out-of-pocket cost you need to pay before your insurance reimburses the amount in the covered claim. Comprehensive insurance also has a limit, the maximum amount you will receive as payment toward a covered claim and is equal to the cash value of your car on the time of the accident.
Owning comprehensive insurance is optional. However, if you are leasing or financing your car, your lender may require you to own this type of insurance until you have paid off the vehicle.
3. Collision Insurance
Collision insurance may help reimburse damages to your vehicle due to collision with another vehicle or object such as a fence, wall or tree. Similar to comprehensive insurance, this type of coverage has a deductible and a limit.
Collision insurance is not mandatory but will be required by leaseholders and lenders if you are financing and leasing your car until your car is fully paid off. Collision and comprehensive insurance are often paired and sold together.
4. Uninsured Motorist Insurance
Law requires mandatory ownership of liability coverage but there are a lot of drivers who don’t own car insurance. If you happen to be in a car accident with one, the uninsured motorist insurance may cover medical bills and damage costs to you and your car. This type of insurance may also help cover costs from hit-and-run accidents.
Car owners in some states are required by law to have uninsured motorist insurance but may be limited only to bodily injury.
5. Underinsured Motorist Insurance
In the event of a vehicle accident wherein the person at fault only has the minimum liability amount to their policy and isn’t enough to pay the costs of your sustained injuries and property damages, an underinsured motorist insurance helps compensate for expenses incurred from the accident.
The definition of underinsured can vary from every state and some states may require both uninsured and underinsured motorist insurance.
6. Medical Payments Coverage
This type of insurance coverage is useful for helping pay medical expenses from injuries suffered in an accident regardless of who’s at fault. It can also cover the medical costs of passengers or family members who have been driving the insured vehicle during the accident. Medical expenses may include surgery, X-ray, ambulance and emergency fees, doctor visits and more.
Also known as MedPay, medical payments coverage is optional and is available in some states only.
7. Personal Injury Protection
Personal injury protection, also known as PIP or no-fault insurance, works just like medical payments coverage and helps pay for you and your passengers’ medical bills after an accident. In addition to that, this type of coverage may also pay for other expenses related to personal injuries such as funeral expenses, lost income, child care and costs beyond health insurance coverage limits.
Out of 23 states, PIP insurance is mandatory in 16 and optional for the rest. While MedPay and PIP have almost the same coverage, MedPay is not available in some states where PIP is being sold. Depending on your state’s laws, you may choose to purchase any of the two but not both.