The law requires almost every driver in the United States to purchase auto insurance. After an accident, car insurance can protect you from liability, provide compensation for vehicle repairs and pay for medical expenses
If you have never bought car insurance before, knowing what is covered and what is not can be confusing. Car insurance covers multiple types of insurance, so it is important to understand each type of insurance
When purchasing an insurance policy, you need to choose the insurance coverage you need and select certain insurance coverage for each type. Besides, your state has legal requirements for minimum insurance coverage
We have compiled a guide to help you understand the most common types of car insurance. We will also help you determine how to find the car insurance that best meets your needs
The most common types of auto insurance
Main types of automobile insurance are available once you purchase a policy, which includes:
Liability insurance
“Liability” means you're legally liable for something. within the case of automobile insurance, which refers to a car accident that's your fault as determined by law. There are two sorts of liability in any car accident: bodily damage and damage to property
Bodily injury liability
If you’re guilty of an accident, bodily injury liability will cover injuries to the opposite party, including their medical expenses, lost wages, and pain and suffering. The coverage also extends to anyone else who is driving your car. for instance, if you hit another driver and that they broke their leg, your bodily injury liability coverage would buy x-rays, surgery, and time spent out of labor. Every state features a minimum requirement for the quantity of bodily injury liability you want to carry to hide one accident, and for every person in an accident
Property damage liability
This covers any damage that you simply might cause to a different person’s property because of the results of a collision. It typically covers cars, but it can cover other items like fences, buildings, mailboxes, or lamp posts. If you mistakenly hit a pole or run into your neighbor’s mailbox, this is often the coverage that might apply. Property damage liability doesn't cover damage to your property. therein case, you’d want to feature collision coverage, which isn't mandated by the state, to assist cover those costs. Minimum property damage liability coverage is usually from $10-25K per accident; your insurance broker can tell you the minimum in your state
Collision
When your vehicle gets damaged during a collision, this is often the coverage that pays for fixing the car. It can even cover damage from potholes. Collision coverage most ordinarily applies after a typical accident with one or more drivers. However, collision coverage only applies to your vehicle—it doesn’t cover the opposite driver’s car. Additionally, collision coverage doesn't cover you for mechanical failure or the traditional aging of your car. If, for instance , your transmission blows out, you'll not use your collision insurance to urge it fixed. If your car is older and not worth much, you'll want to skip this cost to save lots of money
Comprehensive
Comprehensive coverage is for any sort of damage not associated with a collision. as an example , it can cover damage resulting from fires, missiles, earthquakes, floods, vandalism, hitting a deer, falling objects or explosions and glass breakage. So if your car unexpectedly catches fire on the road, your comprehensive coverage would buy the damages. Comprehensive coverage is typically optional. But if your car is newer, costlier or leased, you'll want to think about adding comprehensive, along side collision, to your policy to make sure that you’re not left with empty pockets if something goes wrong
Vehicle coverage
In addition to the specified insurance , you'll want to think about optional coverage types for your vehicle, especially if it's newer or more valuable. This coverage isn't mandated by law. It’s up to you and your agent to work out what proportion you would like to spend and therefore the amount of coverage you’d wish to get
Other optional types of car insurance coverage
Medical payments coverage (MPC)
This is coverage for the treatment of injuries for you or passengers in your vehicle at the time of an accident. It can cover medical payments, lost wages and funeral costs. In some cases, medical payments coverage can also cover you if you're a pedestrian hit by a car. Your medical payments coverage features a limit, which is that the highest amount of cash the insurance firm can pay you for medical costs. Before you check in for this sort of coverage, check your insurance policy to make certain it’s not covered there. Otherwise, you'll find yourself paying for duplicate coverage
Personal injury protection (PIP)
Personal injury protection, or PIP, covers you, your family and anyone riding in your car for injuries, regardless of who caused the accident. If you reside during a no-fault state, you’ll be required to hold this sort of insurance. If you reside in an at-fault state, you're not legally required to possess PIP, but you'll be ready to purchase it for added protection. almost like medical payments coverage, PIP may cover medical and rehabilitation expenses, work loss benefits and funeral expenses
Excess medical payments
Excess medical payments coverage also covers medical expenses after an accident. because the name suggests, excess medical payments insurance features a higher limit than basic medical payments or PIP coverage offers. If you would like the very best level of protection, you'll purchase excess medical payments coverage for another fee. However, confine mind that not every insurance provider offers this sort of coverage. Instead, you'll simply increase your policy limits for normal medical payments or PIP coverage
Residual bodily injury liability coverage
This is another sort of coverage frequently found in no-fault states. It protects you, your family et al. in your car if you're sued due to injuries or death caused to others. Typically, residual bodily injury liability coverage would apply if a passenger in your car got injured in an accident and sued you for negligence because the driver. No-fault states often allow such lawsuits if the injuries are serious enough. confine mind that this sort of coverage might not be available in at-fault states
Gap Insurance
The III defines gap insurance as, “In the event of an accident during which you’ve badly damaged or totaled your car, gap insurance covers the difference between what a vehicle is currently worth (which your standard insurance will pay) and therefore the amount you really owe thereon ”
Vehicles decrease in value the second you're taking them off the lot after you buy or lease them. If you set down alittle deposit on the car, it’s possible for the loan amount to be quite the market price of the vehicle. In simple terms, gap insurance covers the difference between a car’s reduced worth and therefore the amount of the loan
The III states that you simply might want to urge gap insurance if: you made but a 20 percent deposit , you financed the car for 60 months or more, you leased the vehicle, you purchased a car that depreciates faster than other vehicles on the average otherwise you carried over negative equity from an old automobile loan to the new automobile loan
For more information, visit the Insurance Information Institute’s (III) guide to the main sorts of automobile insurance