Knowing the different types and what they cover is essential when looking for car insurance. This will help you find the policy that’s right for you. Here are some of the most common types of car insurance, how they work, and what they cover.
1. Liability Insurance Coverage
Liability insurance coverage is required in most states. This insurance pays for the other driver’s expenses if you cause an accident. This means that if you are found legally liable for another person’s bodily harm or property damage, liability insurance can assist in paying for their medical care and legal defense costs.
It doesn’t pay to repair any damage to your car. It also excludes damages caused by other factors like hail. Furthermore, this insurance coverage does not cover any of your medical expenses. It comes in two forms:
- Property Damage (PD) Liability Coverage: This form of Liability Insurance coverage helps to pay for the repairs of the other person’s property. For instance, if you hit the rear end of another person’s car, the PD can help you pay for the car shop fees.
- Bodily Injury (BI)Liability Coverage: Bodily Injury Liability Coverage is the one that helps you to pay for the medical expenses of an injured person. It can also help to pay legal fees if you are sued.
2. Collision Insurance
Collision insurance safeguards you against financial loss in the event of a collision with another vehicle or immovable objects like a tree or fence. The lender often needs this type of insurance if you are leasing or financing your vehicle. However, it is not mandatory if your vehicle is paid in.
However, Collision Insurance does not cover any damage to your car that is unrelated to driving. For instance, if your car is stolen. It also does not cover damage to another person’s car, your medical bills, or that of another person.
3. Comprehensive Insurance
When your automobile is stolen or damaged in a non-collision occurrence, comprehensive car insurance can assist in paying to repair or replace it. It is sometimes known as “other than collision” coverage. Lenders or lessors of leased vehicles will almost always insist on comprehensive insurance. However, coverage is discretionary if you have fully paid off your vehicle.
This type of insurance often covers damage caused by fire, theft, vandalism, natural disasters, falling items (like a tree or hail), and damage done by animals. In addition, Comprehensive insurance covers damages done to your car as a result of civil disturbance like a riot.
You must note that comprehensive insurance coverage excludes any damage to your car from a collision, damage made to another car from a collision, and your medical bills after an accident or that of your passengers.
4. Personal Injury Protection (PIP) Insurance
Personal Injury Protection Insurance covers your medical expenses if you are involved in an accident, irrespective of who is at fault. This insurance coverage is also known as No-Fault Insurance. It may be required in some states, and some states have it available but do not require it.
This insurance coverage applies even if you were not in your car when the accident occurred. PIP Insurance also covers your lost wages. If you were injured in an accident and could not work, this insurance could help you recover your lost wages.
Sometimes, PIP could also help pay for substitute services if you incur an accident that keeps you from performing household tasks. Also, if an injury from an accident leads to death, PIP may help you pay for funeral expenses.
Although PIP insurance covers your medical expenses, it doesn’t cover bills unrelated to personal injury after a car accident. For example, injury to your car, car theft, damage to other people’s property, and medical expenses that exceed your coverage limits.
5. Medical Payments (MedPay) Insurance
In case of a vehicle accident that qualifies for medical payments Insurance coverage, the insurance company will assist in paying for your medical bills and those of your passengers. Expenses like these may come from trips to the doctor, the hospital, or an ambulance.
Some MedPay Insurance includes coverage for medical expenses for people other than the driver and passengers. Injuries experienced while driving another motor vehicle may also qualify an insured for compensation. Alternatively, if a person is hit by an automobile while walking, they may be protected under pedestrian laws.
6. Towing and Labor Cost Coverage
Towing and labor cost coverage is an optional coverage that you can add to your car insurance. It usually protects you from some of the costs and hassles that come with common roadside breakdowns like dead batteries, flat tires, or even an embarrassing lockout. (Some insurance policies may include this coverage by default, so be sure to ask.)
7. Gap Insurance
Gap insurance is an optional type of car insurance that helps pay off your car loan if your car is stolen or written off and you still owe more on the loan than the car is worth now. “Loan/lease gap coverage” is another name for gap insurance. This coverage is only available to the first person to buy or lease a new car. Gap insurance helps pay the difference between how much your car is worth now and how much you still owe.
8. New Car Replacement Insurance
New Car Replacement Insurance helps you replace your new car if it is totaled in an accident. When you buy a new car, you should do your best to keep it safe. But if something unexpected happens and it gets totaled in an accident, you can get coverage that pays for a new car. If your car is less than two model years old, you won’t just be given a check for what it’s worth now—you will get a new one.
9. Uninsured/Underinsured Motorist Insurance
Uninsured and underinsured motorist coverage will pay for your medical bills and car repairs if you get hit by a driver who doesn’t have insurance or choose to carry the minimum in liability coverage to save money. Most states make it illegal to drive without auto insurance, but an Insurance Research Council study found that 12.6% of American drivers didn’t have coverage in 2019.
10. Rental Reimbursement Insurance Coverage
Rental reimbursement Insurance Coverage is also known as Transportation Expense Coverage. It helps you pay for transportation costs, like a rental car or bus fare, while your own vehicle is being fixed after an insurance claim that is covered.
It doesn’t work if your car needs regular maintenance or if you need to rent a car for a trip. It’s usually optional coverage on a car insurance policy, meaning you must add it and pay an extra premium.
11. Ride-Sharing Coverage
In other words, if you get into a car accident while on the job, you might have to pay for repairs to your car or the medical bills of someone else who was hurt. State laws require that most ride-share companies give their drivers insurance. But if you use your car for work and play, you might want to get extra coverage to protect it.
12. Classic Car Insurance
Classic car insurance is a special kind of policy that helps protect antique or classic cars. Most classic car insurance policies include coverages like collision, comprehensive, property damage, and bodily injury liability. These are also found in standard car insurance policies.
But unlike regular car insurance, classic car insurance covers the car for a portion that the owner and the insurance company agree on. You can also change the amount of coverage you have if the value of your classic car goes up over time.
Frequently Asked Questions
Here are the frequently asked questions on the Types of Car Insurance:
What Kind of Insurance Must You Have by Law?
All states require drivers to have insurance covering property damage and injuries to people, except for New Hampshire.
What Is Basic Car Insurance?
Liability Insurance is the basic car insurance.
Which of The Car Insurances Are the 5 Basic Types of Insurance?
The five basic car insurance include Liability, Collision, Comprehensive, Uninsured, and Personal injury Protection or Medical Payments Insurance Coverage.
What Car Insurance Are Included with A Full Car Insurance Coverage?
Full coverage car insurance is not a specific type of policy. Instead, the term describes a policy that includes liability, collision, and comprehensive insurance.
Conclusion
Getting car insurance is a crucial decision you must make as a car owner. As listed in this article, you can choose from various types. However, you must verify the ones available in your state, as some may be mandatory in your state while others are optional.
