Types of Auto Insurance Coverage
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Auto insurance is required by most states. However, the rules for what types of insurance and how much of each type you have to carry vary from state to state. Regardless of which state you live in, it is important to understand the types of auto insurance coverage you can get. Once you understand the different coverages, you can make an informed decision on which types, and how much of each, you want to carry. Here’s what you need to know.
Vehicle insurance coverages focus on getting your car back to normal after an accident or covered event. These coverages do nothing to help other vehicles that may be involved in an accident. Additionally, these coverages do not include routine maintenance or vehicle parts that fail due to normal wear and tear.
Comprehensive car insurance coverage is used when something damages your car that isn’t another vehicle. Comprehensive coverage would kick in if your vehicle is damaged in a hail storm, flood, earthquake, or another natural disaster. It will also go towards damages that occur if you hit an animal, such as a deer, and that animal does damage to your vehicle. Other events, like your car getting stolen or vandalized and some glass repairs, are usually fall under this type of auto insurance.
Collision coverage is probably the type of auto insurance you immediately think of when someone talks about car insurance. Collision insurance provides coverage for the repairs to your vehicle when you are responsible for an accident. If it would cost more to repair the vehicle than its current value, your car may be totaled. If that’s the case, you’d get a check for the value of your car, up to the limit of your coverage and less any deductibles. This coverage is normally not mandatory. However, if your current vehicle is totaled and you can’t afford to buy a replacement vehicle, you should seriously consider purchasing collision coverage.
Emergency Roadside Service Coverage
Emergency roadside service coverage helps you deal with life’s unexpected curve balls. If your car breaks down on the side of the road, you’ll need to either get your vehicle fixed or have it towed to a local shop. Emergency roadside service coverage will cover towing costs based on the policy limitations and it will also provide coverage towards simple problems, such as if you just ran out of gas, had a flat tire, or need a jump start.
Rental Car Coverage
When your car gets damaged from an accident or comprehensive claim, you’ll need to take your car to the shop and get it fixed. Unfortunately, this means you’ll be out of a vehicle while you car is being repaired. If you carry rental car coverage, you’ll be reimbursed for the cost of a rental car up to a certain cost per day for a certain number of days as specified by your policy.
Loan or Lease Gap Coverage
Unless you own your car outright, you may want to look into loan or lease gap coverage. When you buy a new car, the value of the car often drops faster than the amount owed on your car loan or lease. If you were to get in an accident where the vehicle is totaled, you would be on the hook to cover the shortfall between the amount still owed on the loan or lease and the check the insurance company gives you. To prevent this from happening, you can carry loan or lease gap coverage.
If your car is totaled and the insurance check won’t cover the remaining balance on the loan or lease, gap coverage will make up the difference. For instance, if you bought a brand new SUV with a $50,000 auto loan and totaled the car on the way home from the dealership, the actual depreciated value of your vehicle may only be $45,000. If you have gap coverage, you’ll be covered for the $5,000 difference between the actual value and the amount you owe, less any deductible that may exist.
Customized Parts and Equipment Coverage
If you like to personalize your vehicle after you purchase it, you probably want to look into customized parts and equipment coverage. Typical auto insurances only cover what would come in a stock model of your vehicle. If you add a custom paint job, custom rims and an amazing stereo system along with other modifications, you won’t be covered for these items under a regular insurance policy. Customized parts and equipment coverage will provide coverage for most customizations. Check the policy to see exactly what it covers as there may be limitations that vary from insurer to insurer.
While not every accident results in injuries, there is always the possibility that someone could get hurt, even in the most minor of collisions. Unfortunately, some injuries can be very expensive to treat depending on the severity of the accident. Medical auto insurance provides protection from the financial risk from injuries in an accident for you and your passengers.
Medical Payments Coverage
Medical payments coverage pays for a variety of situations and normally covers you and your passengers. In most cases, it starts being used after any health insurance benefits reach their maximum limits. Medical payments coverage usually pays for funeral, dental, and medical expenses for both the driver and any passengers if the injuries happened while you were driving. It even covers you if you’re hit by a vehicle while walking or riding a bicycle.
Personal Injury Protection Coverage
Personal injury protection is normally offered in no-fault states. While every state has different regulations concerning personal injury protection coverage, in most cases it covers you, your passengers and any other drivers listed on your policy. It can provide coverage for medical expenses, lost wages, funeral expenses and substitute services if you can’t perform typical household tasks after an accident.
Liability insurance provides protection toward the other person’s costs when you are found at fault in an accident. This coverage is the most common state mandated insurance coverage. If liability coverage is required in your state, you are required to have a minimum amount, but you can always buy more than the minimum coverage at an increased cost.
Bodily Injury Coverage
Bodily injury coverage goes toward paying for the other person’s injuries in an accident in which you are found at fault. Typically this coverage has two tiers for how much it will pay. First, there is a per person coverage amount. Next, there is a per incident total coverage amount. These amounts provide coverage toward medical costs, lost wages, funeral expenses, and even legal costs if you’re sued for damages.
Property Damage Liability Coverage
Property damage liability insurance provides coverage for the property you damage if you’re found at fault in an accident. It most commonly pays to repair or replace the other person’s vehicle. However, if your car hits another person’s house, this coverage would also go towards the costs to repair the home. It also covers other types of personal property that are damaged and owned by someone else.
Liability Coverage in No-Fault States
If you live in a no-fault state, insurance is a bit more complicated. The insurance of the person who is hurt covers their own medical expenses in most cases. However, if injuries from an accident that you were technically at fault for are bad enough, you may be sued. In that case, your bodily injury coverage may kick in to for your liability. Even in no-fault states, property damage liability coverage usually works the same way as in at-fault states and described above.
Uninsured and Underinsured Motorist Liability Coverage
Uninsured motorist liability insurance provides coverage for you, your authorized drivers, and passengers. Depending on the amount of coverage you select, it can go towards your medical costs, lost wages and damage to your property should you, unfortunately, be in an accident in which the at-fault party had no auto insurance. Underinsured motorist coverage works in a similar manner except it only kicks in when the at-fault driver has insurance but their insurance isn’t sufficient to cover your expenses.
The three main types of auto insurance coverage include vehicle, liability and medical coverages, with each having their own uses. Make sure you have considered each carefully before picking which car insurance coverage you want on your policy. You should always carry at least the minimum amount required by law. After that, you may want to consider increasing your coverage so that you, your passengers, and your assets are protected from even the worst accidents.