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A basic auto insurance policy usually includes six types of auto insurance coverage to make sure every driver has just what they need, at the very least types of insurance coverage for auto. They provide the broadest protection for the most common events for which you would file a claim . In addition to those six basic types, there are several others that apply to very specific events that may cause damage to your vehicle, or to specific needs you may have if you’re involved in an accident. With so many types of automobile insurance, how do you now what is right for you? Read on to get all of the different types of auto insurance coverage explained and then be sure to enter your zip code now to compare online auto insurance quotes ! Most of these coverages are optional, and adding them to your policy will increase your premium. Depending on the situations you encounter, having the right kind of coverage at the right time can save you a lot of stress and financial loss.Here are some of the common coverage characteristics of auto insurance: Liability Coverage Property Damage Liability Bodily Injury Liability Comprehensive Coverage Collision Coverage Fire and Theft Coverage Physical Damage Coverage Personal Injury Protection Underinsured Driver Coverage Uninsured Driver Coverage Gap Insurance Rental Car Insurance Pay-Per-Mile Coverage Liability Coverage Liability insurance does not cover any expenses related to damage to your property, or any injuries you may suffer. It exists to pay for those things suffered by the other parties in an accident for which you are found to be at fault. All states require a minimum amount of liability coverage in order to legally drive a vehicle. In some states, you can avoid buying liability coverage if you can prove you have the personal financial resources to cover the minimum requirements levied by the state.
Property Damage Liability Property damage liability does not cover damage to your own property. It kicks in when you are found at fault in an accident, and your vehicle has damaged someone else’s property. There are varying degrees of this type of coverage that will determine exactly what damages are covered. You will choose the amount of coverage when you buy the policy, and there may also be state-imposed minimums, especially if your vehicle is financed. The amount of coverage selected will determine the premium you pay for it and whether or not it is cheap auto insurance .
Medical expenses can skyrocket and cause tremendous financial hardship if you have to pay for them out of pocket. Comprehensive Coverage True to its name, comprehensive coverage applies to almost any type of loss that may occur, but not as a result of an auto accident. This is the insurance coverage that pays for damage to your car caused by something other than another vehicle. It could be anything: damage from severe weather such as tornadoes, hurricanes, or hail storms, or natural disasters such as earthquake, flood, or fire. It also applies if you hit an animal, or if your vehicle is vandalized or stolen.
It’s a good idea to pair comprehensive coverage with another type of coverage like collision to cover damage that does result from an accident. Collision Coverage Collision coverage is exactly what the name implies. It applies when your vehicle is involved in any kind of collision, whether it’s with another vehicle, a building, a guardrail, or any other stationary object. In some cases, it also covers damage caused by the vehicle flipping over, or running over potholes. Collision coverage will pay for the repairs your vehicle needs after any of these incidents, or to replace your car altogether if the collision causes a total loss, also known as “totaling” the car. The most important thing to remember in this case is, you will be reimbursed for the current value of the vehicle, not the purchase price. Fire and Theft Coverage As the name states, this type of applies when your vehicle is damaged or totaled as a result of fire, or if your car is stolen. Auto insurance theft coverage is something that most drivers do not consider untill it’s too late.
PIP is a complement to bodily injury liability coverage in that it covers approximately 80% of medical expenses including rehabilitation, funeral costs, and lost wages. Where it differs from bodily injury liability is that it covers you, your passengers, or anyone authorized to drive your vehicle. It also covers you and anyone else named on your policy when driving someone else’s vehicle. This type of coverage is mandatory in 16 states. Your state’s Department of Insurance, or your insurance agent, will be able to tell you if you are required to have it. If you live in a state where it’s optional, you may want to consider adding it to your policy for extra protection. Underinsured Driver Coverage Also known as underinsured motorist coverage, or UIM, this type of coverage protects you if you’re involved in an accident with a driver who carries the legal minimum amount of liability insurance, but no extra insurance to cover all your losses.
UIM will cover your medical expenses, property damage (in some states), and lost wages. It may also cover the expense of a rental car until your own vehicle is repaired. UIM is mandatory in some states, and optional in others. Check with your state’s Department of Insurance, Department of Motor Vehicles, or your insurance agent for your state’s requirements .
Like UIM, it covers your medical expenses and those of your passengers. In some states, it also covers damage to your vehicle, and may cover reimbursement for a rental car. It is not mandatory in all states, so check the laws where you live. Gap Insurance Within the first three months of buying a new car, it loses as much as 30% of its value.It would only cover the current value of the vehicle, but you would still be responsible for the remainder of the loan, or the “gap” between the value of the car and what you owe your lienholder. Because of this, gap insurance is also known as loan/lease insurance, or loan/lease payoff insurance. Some lenders may even require it when you finance a vehicle, so be prepared for this added expense when you buy a new car. Rental Car Insurance Many auto insurance policies will still cover you when you drive a rental car, but not all.
It offers some of the same basic coverages as your standard auto policy, such as comprehensive and collision coverage, but in this instance, it’s called a loss damage waiver (LDW), or a collision damage waiver (CDW). It also includes liability coverage for damage to property belonging to others, and personal accident coverage for injuries. Unique to rental car insurance is personal effects coverage (PEC), which reimburses you if your belongings are stolen from the car you’re renting. Rental car insurance is not the same coverage that provides you with a rental car if your vehicle is damaged in an accident.
Insurance companies have taken note of how consumers’ driving habits have changed, and are adapting. Pay-per-mile coverage, also called pay-as-you-drive or usage-based insurance, basically means what the name suggests—you pay for insurance based on the number of miles you actually drive rather than an annual estimate. Of all the auto insurance coverage types, this appeals most to those who may work at home, or even want to insure a second vehicle that is not frequently driven. The may also take into account when, where, and possibly how you drive to determine your rates.