Six Car Insurance Coverages Types You Need to Know
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Deciding to purchase a car insurance policy seems like an easy decision. In exchange for your premium payments, you receive essential coverage that financially protects you in the event of an accident or other incident that causes damage.
After an accident, expenses can add up to several thousands of dollars in vehicle repairs, medical expenses, or property damage. Having a monetary safety net gives you peace of mind.
But when it comes time to buy a policy, what are the types of auto insurance coverage? Car insurance policies contain several categories with specific financial limits. Knowing what each means and how much it covers can help you make the best decision when picking a policy.
Let's explore six types of auto insurance coverage in more detail.
1. Liability insurance
If you cause an accident, liability insurance pays the other driver's medical and property damage expenses. Divided into two separate categories, bodily injury liability and property damage liability, this type of car insurance covers a wide range of possible costs.
If a severe accident requires emergency medical attention at the scene, bodily injury liability covers the expense. And after initial treatment, bodily injury liability insurance pays for subsequent medical care, up to a predetermined limit. If the other driver can't work due to their injuries, bodily injury liability insurance covers lost wages, too.
Property damage liability insurance replaces or repairs any property you're at fault for damaging, like someone's home or vehicle.
Like each insurance coverage category, bodily injury liability and property damage liability have set monetary coverage limits. Those amounts depend on the policy you choose and where you live.
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2. Collision insurance
For damage incurred by your vehicle, collision insurance pays for repairs and, in some cases, replacement.
Collision insurance covers the costs if you're in an accident with another vehicle and your vehicle requires costly repairs to get back on the road.
Or, if you run into a stationary object like a wall or street light, collision insurance pays for the necessary fixes to put your car back in running condition.
The third scenario covered by collision insurance is if you're in a single-vehicle accident and your car needs repairs as a result.
Several situations may seem like they would apply for collision insurance coverage, but they don't. Collision insurance coverage doesn't pay for expenses related to other driver's vehicle damage, medical expenses, or damage caused by weather or theft.
Before collision insurance benefits go into effect, you're responsible for an initial deductible, usually up to $1,000. Collision insurance has a set limit for how much it covers, depending on the policy you choose, too.
3. Comprehensive insurance
Comprehensive insurance coverage pays for vehicle damage caused by incidents other than collisions. Types of events covered by comprehensive insurance include hail damage, theft, fire, and vandalism.
If you're currently paying an auto loan or leasing your car, odds are you're required to have comprehensive insurance. But if you already own your vehicle, comprehensive insurance is optional.
Comprehensive insurance doesn't cover damage to your vehicle or another driver's vehicle in a collision or your or your passengers' medical expenses.
Like collision insurance, a deductible applies before comprehensive insurance pays any benefits. You choose your deductible amount – typically $500 or $1,000 – and pay it to your insurance company before they pay the rest of the repair costs.
Lower deductibles go along with higher premiums, with the opposite being true for higher deductibles.
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4. Uninsured and underinsured motorist insurance
Uninsured and underinsured motorist coverage keeps you protected when other drivers' insurance won't pay for your medical expenses or car repairs.
If a driver without insurance collides with you, uninsured motorist coverage steps in to pay any resulting medical bills or vehicle damage.
Underinsured motorist coverage is when the at-fault driver has insurance, but their liability limits won't cover all your medical expenses.
Depending on the state you live in, these types of insurance coverage may be optional.
5. Personal injury protection
Sometimes referred to as PIP or no-fault insurance, personal injury protection pays for medical expenses no matter who's at fault in an accident. In addition to covering medical costs, personal injury protection also pays lost wages if you're unable to work for some time.
Personal injury protection doesn't pay for damage to your vehicle from a collision or other event, nor does it damage others' property.
PIP also has set financial limits for covered expenses. Your insurance company won't reimburse any costs beyond your coverage. A large number of states mandate this type of insurance.
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6. Medical payments coverage
Medical payments coverage helps pay you or your passengers' related medical expenses when an accident occurs, regardless of fault.
Types of medical costs covered include health insurance deductibles and copays, emergency medical technician fees, and hospital visits.
No matter where you live, medical payments coverage is an option on your auto insurance policy.
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April 15, 2022
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