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Car Insurance Policy: The Different Components

If you’re purchasing a new car, you’ll probably need to understand the various types of coverage available on auto insurance. There are numerous car insurance options that can fully protect you in case of an accident.

Depending on where you reside, some of these coverages are mandatory while others are optional. So, understanding what’s approved by your state and what each policy covers can go a long way in helping you choose the perfect coverage for your situation.

Liability Coverage

Auto liability coverage is often mandatory in most states. As a driver, you should purchase at least the lowest amount of liability coverage stipulated by state law. Typically, liability coverage features two components: bodily liability and property damage liability.

Bodily injury liability might help cater for expenses related to another person’s injuries in case you’re involved in an accident. Property damage, on the other hand, might help pay for damage you cause to someone else’s property while driving.

Uninsured/Underinsured Motorist Coverage

If you get hit by a driver who isn’t insured, uninsured motorist coverage might help pay for all of your medical bills as well as car repairs. And if the driver is underinsured, meaning that they’ve auto insurance but their liability limits can’t cover your medical bills adequately, underinsured motorist coverage might help.

Collision Coverage

If you get involved in an accident with another person’s vehicle, or if you accidentally hit an object like a fence, collision coverage might cater to the repair or replacement of your car.

This type of coverage is usually optional, but your lender or leaseholder might need it at some point.

Comprehensive Coverage

Comprehensive coverage can help cover damage to your vehicle from things such as theft, vandalism, and fire. Plus, this type of car insurance may help cover expenses related to your vehicle’s repair or replacement. It also comes with a deductible, which refers to the amount of money you’ll need to pay out of pocket before your insurer compensates you for a covered claim.

Though comprehensive is an optional type of coverage, your lender might need it if you’re paying off or leasing your car.

Medical Payments Coverage

If you’re driving an insured car and get injured during an accident, medical payments coverage might help cater for expenses associated with the injuries. Some of the covered costs might include X-rays, hospitals, and surgery.

Typically, this type of coverage is mandatory in certain states and optional in others.

Personal Injury Protection

Personal injury protection (PIP) is only accessible in some states. In the event that you’re injured during a car accident, PIP can help pay for your medical bills. In addition, PIP might also cover other expenses incurred as a result of your injuries- for instance, child care expenses and lost income. It’s required in some states, but it’s optional in other countries where it’s available.

Other Types Of Car Insurance

There are numerous other optional coverages that you may want to incorporate into your car insurance policy. But this depends on your particular situation. Ask your insurance agent what each one of the covers so that you can put together what’s right for you.

Remember, the different components of an auto insurance policy are uniquely designed to protect you and your car.

Bodily Injury Liability Coverage

This type of coverage is often utilized in no-fault states. It safeguards you and your family in case you’re sued due to injuries or death caused to other people. No-fault states often permit such claims if the injuries are serious enough.

And since life is unpredictable, you may not know what will happen tomorrow. So, it’s always good to be prepared in case of anything.

Gap Insurance

In case you’re involved in an accident and your car gets totally damaged, gap insurance covers the variation between what the vehicle is currently worth and the actual amount you owe it.

Typically, vehicles decrease in value the moment you buy or lease them. For instance, of making a small deposit on the vehicle, it’s possible for the loan amount to rise above the vehicle’s market value. Simply put, gap insurance covers the difference existing between the reduced value of your car and the actual loan amount.

How to Choose the Best Type Of Coverage

When it comes to car insurance, every state sets its own minimum amount. You can refer to the information offered by NAIC to learn more about your state’s minimum requirements.

The minimums are often indicated by three numbers, 25/50/10, that refer to liability insurance. In this case, the 25 means that $25,000 is the maximum amount that might be paid for one individual’s bodily injury per accident. On the other hand, the second number indicates the maximum payout per accident while the third value covers property damage maximum payments.

But this doesn’t necessarily mean that your insurance should match the state minimum. If you need more protection, you can purchase more expensive policies that payout more in case of damage. If you have an expensive vehicle, for instance, you might need to buy more coverage than the minimum so as to get full cover for damages.

Take your time to compare different coverage types and rates. All agents know the most current minimum car insurance coverage types you may need for your state. You can also ask them how much coverage you may need on top of the minimums. Plus, you can choose additional coverage based on your lifestyle, your local health care costs, your peace of mind, as well as the value of your possessions.

Conclusion

Driving with quality coverage gives you peace of mind. So, partner with a car insurance company that can help you stay protected wherever you go. Just be sure to find an insurer who’s both efficient and dependable.

But before choosing any of their car insurance policies, be sure to carefully assess your situation. Remember, there are several types of auto insurance policies you can choose from, including liability coverage, which is often mandatory, comprehensive, insured/underinsured motorist insurance, collision coverage, medical coverage, gap insurance, and much more.

 

Written by Marcus Richards

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