Introduction
Auto insurance is a necessary and required expense for any responsible driver. It’s important to understand the different types of auto insurance available and the coverage that each type provides, so you can make an informed decision when purchasing a policy.
In this post, we’ll provide a comprehensive guide to help you navigate the world of auto insurance and go over the details of different options available under the auto insurance policy umbrella.
What is Auto Insurance
Auto insurance is a contract between an insurer and policyholder that provides protection against losses incurred due to traffic accidents or other automobile-related incidents. It provides financial reimbursement for damages caused by incidents such as theft, vandalism, fire, or any other type of accident that results in damage to your vehicle or property.
Depending on the type of policy you purchase, auto insurance may also provide coverage for medical bills from injuries sustained in an accident.
Auto insurance can be bought either with liability only coverage or with multiple sub-packages bundled under the comprehensive insurance umbrella.
Types of Auto Insurance Coverage
There are many types of auto insurance coverage available and choosing the right one for your needs can be daunting. The most common types of coverage are liability coverage, collision coverage, comprehensive coverage, medical payments coverage, rental car reimbursement coverage, uninsured/underinsured motorist coverage, and gap insurance.
Each one provides different levels of protection. Let’s take a look at some of the most common types of auto insurance coverage.
Liability Only or Third Party Coverage
Liability coverage helps pay for damages that you cause in an accident, including medical bills, car repairs, and legal costs. This is usually the minimum required type of coverage by law.
This type of auto insurance covers damages that occur when you cause an accident and are found liable for those damages. Liability claims usually cover bodily injury costs as well as property damage costs incurred by another party due to your actions on the road.
Liability insurance usually does not cover damages to your own car in an accident.
Learn more about Liability Only Coverage.
Comprehensive Coverage
In addition to third-party Liability only coverage, Comprehensive insurance helps pay for non accident related damages such as theft, vandalism, fire damage, flooding, downed trees or other natural disasters. This type of coverage can also include windshield replacement and rental car reimbursement in case your vehicle needs repairs after an incident.
Comprehensive coverage covers non-collision related damages caused to your vehicle such as theft or vandalism.
It also covers natural disasters like flooding or hail damage that occur while you have comprehensive coverage on your vehicle. Comprehensive claims usually cover repair costs up to the ACV of your car at the time of the incident.
Learn more about Comprehensive Coverage.
Additional Options to Add to Your Auto Insurance
In general basic insurance, liability only or comprehensive comes with everything that is required to have at a minimum under law, there are additional options available that you may want to review with your agent.
It may be the case that some coverages mentioned below are already part of your core insurance package, you may want to revisit the amount or coverage provided under each category. It is usually the case that basic insurance packages only cover the minimum required under state laws.
For Example in California following are the minimum requirements.
- $15,000 for injury/death to one person.
- $30,000 for injury/death to more than one person.
- $5,000 for damage to property.
Many times you may want to get insurance with higher coverage than these minimum required amounts.
Collision Coverage
This type of auto insurance covers damages caused to your vehicle when it collides with another object such as another car or a tree. Collision claims usually cover repair costs resulting from a collision up to the actual cash value (ACV) of your car at the time of the incident.
This type of coverage is especially important if your vehicle is new or valuable.
Usually, under liability only coverage, damage to your own vehicle will not be covered.
Learn more about Collision Coverage
Gap Insurance
Gap insurance helps pay off any unpaid balance left over after a total loss claim is paid out due to depreciation values being lower than what was originally borrowed on a loaned amount used towards purchasing a new vehicle. This type of auto insurance can help save money from having any outstanding debt remaining once repairs have been made.
Uninsured or Underinsured Motorist Coverage
Uninsured/underinsured motorist (UM/UIM) protects you financially if someone without enough (or no) auto insurance causes an accident that results in injury or property damage caused by them but paid out by you instead because they cannot afford it themselves. UM/UIM claims pay up to policy limits set forth in each state’s regulations concerning minimum amounts required for this type of protection.
Learn more about Uninsured Motorist Coverage
Medical Payment Coverage
Medical payment (MedPay) coverage pays for medical bills associated with an accident regardless of who was at fault. This type of coverage can be especially beneficial if you don’t have health insurance or if your health plan has high deductibles or co-payments that need to be met before benefits kick in.
Learn more about Medical Payment Coverage
Rental Car Reimbursement Coverage
Rental car reimbursement provides financial assistance if you need to rent a car after an accident occurs while driving your own insured vehicle. Most policies provide daily payment limits depending on what type of rental car you need and how long it will take for repairs on your own vehicle to be completed before it is ready for use again.
Learn more about Rental Car Coverage
Can Auto Insurance Be Denied
Auto insurance can be denied for a number of reasons.
One reason is if you have a poor driving record. If you have been in accidents or gotten traffic tickets, your auto insurance company may deem you too high of a risk and decline to offer you coverage.
Another reason auto insurance can be denied is if you do not have a driver’s license. In some states, it is illegal to drive without car insurance, so if you are caught driving without coverage, you will likely have your license revoked.
A third reason auto insurance can be denied is if you live in a high-risk area. If there is a lot of crime or natural disaster in your area, the auto insurance company may charge more for coverage or refuse to offer it all together.
Points to Remember
- Auto insurance is required by law in most states
- There are several types of auto insurance, including liability, comprehensive, and collision
- You should always shop around for the best rates on auto insurance
- You can save money on your auto insurance premiums by increasing your deductible
- Make sure you are fully covered by your policy
- Be aware of the coverage limits on your policy
- Review your policy regularly to make sure it still meets your needs
- Don’t drive without auto insurance
- Report any changes in your driving habits or car ownership to your insurer
- Keep a copy of your policy in case you need to file a claim
Conclusion
Auto Insurance is essential when owning and operating a motor vehicle because it offers protection against potential losses caused by traffic accidents or other automobile-related incidents which could leave drivers with high monetary burdens without proper protection in place first before
There are many factors to consider when buying auto insurance, but it’s important not to overlook the importance of having adequate protection against accidents and other risks associated with owning a vehicle. Having the right amount and type of auto insurance can help protect you financially should something happen while on the road.
Be sure to talk with your insurance agent about which types and amounts best meet your personal needs and budget before making a purchase decision so that you can enjoy peace of mind knowing that you’re protected should something unexpected happen on the road!