Car insurance will not keep you from having or causing an accident, but it will help you pay the high medical expenses and repair costs that result from a severe accident. The amount your coverage will payout is determined by the type of car insurance you purchase and your select limits. Car insurance can cover the expenses if you cause a car accident and injure or damage someone else’s vehicle. Based on the type of insurance coverage you have, it may also offer coverage to your car due to accidents or other incidents, such as car theft. Choosing the best car insurance, however, can be a difficult task.
The requirements of the various states differ, but the various forms of insurance coverage offered by insurance providers can also add to the confusion. Car insurance is made up of multiple types of coverage, each of which provides a unique level of protection. Every state that necessitates car insurance has a minimum amount of coverage that you must have.
However, these amounts are small compared to the actual costs you could incur if you are at fault in an accident or need to fix or replace your vehicle, which is why it is a good idea to purchase more than your state’s minimum requirements. Knowing what each portion of auto insurance covers and how much coverage you require is critical when purchasing a new policy.
This guide explains the various types of coverage available and how to select the best insurance policy for you.
Uninsured/Underinsured Motorists Coverage
Uninsured motorist coverage will pay for vehicle repairs if you are hit by a hit-and-run motorist or someone without auto insurance. It also covers any medical bills, pain and suffering, and (worst case scenario) funeral costs incurred by any passengers in your vehicle. In some states, this kind of coverage is necessary.
On the other hand, underinsured motorist coverage protects you in the event of an accident where the driver at fault does not have any or enough insurance coverage to pay for all the damages. This type of coverage is a reasonably affordable add-on to a standard auto insurance policy that can be useful in the case of an accident.
This coverage does precisely what the name implies: if you’re in a car accident, it will help pay for your vehicle’s repairs. If the repair expenses exceed the cost of your car, your insurance company will most likely cut you a check for the total worth of your vehicle rather than paying for repairs. Collision insurance is a must-have if you own a brand-new—or relatively new—car.
Bodily Injury Liability Coverage
This policy covers medical costs, reimbursements, funeral expenses, legal costs, and pain and suffering costs if you get involved in an accident that causes harm to others. It protects you, your passengers, motorists, passengers in other vehicles, and injured pedestrians. Most states necessitate this type of coverage, and the minimum limits vary by state.
Property Damage Liability Coverage
If you cause an accident, this covers the damage you cause to other cars and property damage. Assume you swerve to avoid a fallen tree or someone’s dog and crash into someone’s fence. Property damage liability coverage will assist in covering the cost of fence repairs or replacement. This coverage, however, seldom provides cover to your vehicle. You’ll need collision insurance to cover those costs.
Property damage liability is required in all states, but the required minimum coverage limits vary. However, these needed minimums are often insufficient to fully protect you—especially when you consider that the average cost of a new car is $47,000, according to Consumer Reports. Speak with your insurance provider about how much property liability insurance you require.
When you see the word “comprehensive,” you might think that’s all the coverage you’ll need because it covers everything. However, this is not the case.
Comprehensive insurance covers the repair costs of any damage to your vehicle that isn’t the result of a collision. Destruction of property, riots, theft, fire, natural disasters (think floods, hurricanes, and tornadoes), animal damage (you hit a dog), and falling objects (fallen trees) are all examples. This insurance also covers theft of your vehicle and/or its contents. Many lenders require this type of insurance. If you still owe money on your car or are leasing one, check with your lender to see if comprehensive coverage is needed.
The car dealer might require you to obtain gap insurance if you lease a car. If you are in a disaster or the vehicle gets stolen, this coverage will pay the difference between the car’s value and the amount owed on the lease. Some leases include this coverage for no additional cost, so carefully read your leasing contract before purchasing this coverage on your own.
On a leased car, you may also need to have a collision and liability insurance plan and your gap insurance.
Auto insurance is essential whether you own a car, lease a vehicle, or drive someone else’s car. The right auto insurance could save you money if your car is stolen, damaged, or worse, if you cause an accident that injures you or others.