Car Insurance Types Explained

When you purchase a car insurance policy, you have the option of choosing from a variety of different types of insurance. As a result, most auto insurance policies really are a portfolio of insurance coverage, and what is included will vary from one policy to the next. Understanding the types of car insurance can make you a more intelligent shopper when selecting a policy. Here are some of the different types of coverage that may be included.

Liability Insurance

Most states require that drivers have a minimum amount of auto liability coverage. If you are in an accident and you are at fault, your liability insurance will pay for damage to others' property. It will also pay for medical bills if the other party is injured in the accident.. Covered property damage includes both damage to others' vehicles and damage to other types of property, such as buildings, fences, mail boxes, etc.

How much auto liability insurance you should purchase depends on a number of factors, including your state's minimum requirements and the value of your personal assets. (The more you have that could be taken to cover liability in an accident, the more liability coverage you may want to purchase.)

Uninsured Motorist Insurance

Uninsured (or underinsured) motorist insurance is what it sounds like; it is coverage that kicks in if you are in an accident in which the other driver is at fault, but the other driver either has no or inadequate insurance to cover the damage to your car or your person. If you don't have uninsured motorist insurance, you could end up with the bill in an accident that is not your fault.

Collision Insurance

Collision insurance covers damage to your own vehicle if an auto accident is your fault. How much auto collision insurance to purchase largely depends on the value of your car. In some cases, for example, if you have an older model, high-mileage car with little value, you may not need collision insurance at all.

Comprehensive Insurance

Comprehensive insurance covers your car if it is damaged by something other than an auto accident. For example, your auto comprehensive insurance would pay if a tree fell on your car in a wind storm, or your car was stolen.

Medical and Personal Injury Insurance

Medical or personal injury insurance coverage pays for medical costs resulting from an auto accident. It covers you and any passengers in your car. Fault is not an issue with this coverage.

Gap Insurance

Gap is specialized coverage for those who owe more on a vehicle than it would be worth if totaled in an accident. Since most auto insurance only covers the market value of an auto, your lender may require gap insurance until the market value of your car equals or exceeds the value of the loan.

The types of coverage discussed in this article are the most common and, therefore, the types of car insurance coverage most drivers need to consider. There are many other types of coverage that can be added to an auto insurance policy, such as rental car reimbursement, towing, lost wages and no-fault insurance, which is required in some states, to name just a few.

Sources:

Thursday Bram, moneyning.com/budgeting/7-types-of-car-insurance-which-ones-do-you-really-need , "7 Types of Car Insurance: Which Ones Do You Really Need"

www.carinsurance.com , "Types of Auto Insurance Explained"