Like most other types of insurance, auto insurance comes in a range of coverage options designed to protect the liability of the policyholder. The key difference with auto insurance is that most states mandate minimum coverage requirements for legally operating a motor vehicle on public roads. However, there are many more options than just the minimum required coverage.
Let’s take a look at what’s available and what you might need when purchasing a car.
There are six kinds of auto insurance:
Auto Liability Coverage
Uninsured and Underinsured Motorist Coverage
Personal Injury Coverage
Comprehensive Coverage
Collision Coverage
Medical Coverage
What is Auto Insurance?
Auto insurance is a group of policies that provide different types of property and injury coverage for individuals involved in a car accident. There are many reasons why drivers might be required to carry auto insurance such as state driving laws or lender lien requirements. Even it if isn’t required, it is a good idea to be familiar with these types of coverage and select what is right for you.
What are the Different Types of Auto Insurance?
The coverage options for automotive insurance range from minimum liability for other parties involved in an incident to various types of full coverage that will repair a vehicle or pay medical bills resulting from an accident. There are six specific types of coverage you should consider for your auto insurance policy. Let’s take a look.
Auto Liability Coverage
Auto liability is one component of the minimum required coverage in most states. It covers bodily injury and property damage to other parties in an event caused by the policyholder . Here’s what to know:
Carrying just the minimum coverage can provide lower premiums.
If you drive an older vehicle, it may be worth weighing the cost of full coverage against the value of the vehicle.
A bare-bones liability policy will not cover repairs to your vehicle if you are at fault for the accident.
Uninsured and Underinsured Motorist Coverage
Despite laws in many states, there is always a risk that you will be hit by an uninsured motorist. When the worst happens, this provision on your insurance policy will help cover your losses. These policies can pay for damage when you are the victim of an uninsured driver. Did you know that about one in eight drivers on U.S. highways is uninsured and that number doubles to one in four in states like Texas and Florida with a higher population of undocumented citizens? Underinsured motorist coverage kicks in when the other driver does not have enough insurance to cover your damage. Here’s what you need to know:
UM and UIM can be used for lost wages, pain, and suffering, as well as medical expenses if you are hit by an uninsured or underinsured driver.
It’s absolutely necessary when you share the road with other drivers unless you want to risk personal losses.
In many states, you may be required to carry uninsured motorist coverage as part of the minimum auto insurance requirements.
Personal Injury Auto Insurance
Personal Injury Protection or PIP is a special type of auto insurance that is limited to certain states. For example, Florida is a no-fault state where PIP is a common coverage type. This type of insurance can cover things like certain medical expenses, lost wages, or even childcare while you are recovering from an accident. Here’s what you need to know:
PIP coverage is required by some states.
This policy may provide medical coverage even without medical insurance.
There are no universal requirements, therefore benefits may vary by state.
Comprehensive Auto Insurance
Comprehensive auto insurance covers damage to your car from certain covered events (usually no-fault incidents.) For example, it may cover a collision with a wild animal or dents from a hail storm. Comprehensive is optional in most states, however, it may be a required component of full-coverage insurance to satisfy lender lien requirements. Here’s what you need to know:
Coverage for certain natural disasters like flooding may not be covered.
While comprehensive insurance does cover theft and vandalism, it typically doesn’t include personal items stolen from your vehicle.
The additional coverage will add dollars to your premium, but the peace of mind may be worth it.
Collision Auto Insurance
Collision auto insurance covers your property damage in the event of a collision with another car or object. Liability coverage typically covers expenses for the ‘other’ driver while your collision policy will cover your expenses. Collision insurance is a component of full coverage insurance that is typically required by lenders. Here is what you need to know:
It’s the best kind of coverage to have for almost any kind of accident, including rollovers, potholes, single-car crashes, and collisions with parked cars.
Collision policies typically pay for repairs or current auto value for totaled vehicles, often leaving a gap between loan balances and policy payouts that require another type of insurance called gap insurance.
Collision is optional full-coverage insurance for most drivers; however, most lenders require it for financed vehicles.
Medical Auto Coverage
Medical payments coverage will pay for the ambulance ride and medical bills for you and your passengers in the event of an accident. This type of coverage is required in many states, in addition to PIP coverage. Since car accidents are the leading cause of injury in the U.S., this additional medical coverage is often a great idea. Here is what you need to know:
Purchasing this type of additional coverage is often affordable.
It’s supplemental insurance that can help fill gaps that might otherwise leave you with unpaid medical bills.
Coverage is typically limited to a smaller amount, like $10K or less per person.
The Bottom Line on Types of Auto Insurance
There are many different types of coverage under the umbrella of car insurance. When you purchase an auto insurance policy, your provider has grouped several of these policies, making it convenient to pay one premium. However, auto insurance typically has different policies with different coverage details and limits. What’s more, the coverage you may be required to carry also varies by state and lienholder.
For help navigating the ins and outs of auto insurance, get in touch with the friendly and knowledgeable Advisors at CIIG. We’re here to help make sure you have the right coverage and answer any questions you may have. We look forward to meeting you and servicing your insurance needs!