5 Types Of Car Insurance And What They Cover?

Hey Sunshine,

Do you know what are the different types of car insurance and what they cover? What insurance coverage do we get on our car insurance? Here is the ultimate guide to the types of car insurance policies and what they cover so that you are insured for all your needs and situations.

Like any other insurance, car insurance policies also include various categories of coverage, each with its own set of fees and advantages. As a driver, you will typically have to choose different coverage amounts for different components which may make it a little overwhelming for you. However, it’s crucial to understand which types of insurance are appropriate for you. Here’s a rundown of the most common 5 types of car insurance policies:

Car Insurance Coverage Definition

Before hopping into different types of car insurance, it is essential to know what car insurance coverage means. An automobile insurance policy protects the vehicle’s owner against covered financial losses resulting from damage or theft of the insured vehicle. However, there are various terms and conditions that apply to every specific insurance company. We recommend you go through the whole policy and compare auto insurance quotes online before making any final decision. Knowing the different types of car insurance and their coverages is vital in finding the correct policy for you if you’re shopping for auto insurance.

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5 Types of Car Insurance Explained

Here are some of the most common 5 types of car insurance and how they work, and what they cover:

  1. Car Liability Insurance
  2. Car Insurance For Physical Damage
  3. Rental Insurance
  4. Coverage for uninsured and underinsured motorists
  5. Medical Payments Insurance (PIP)

1. Car Liability Insurance

If you’re responsible for a car accident, liability insurance protects the other party financially. It provides coverage for bodily injury (BI) and property damage (PD). BI covers expenses incurred due to injuries received in an accident, whereas PD covers property damage. This ensures that drivers who injure people or cause property damage are adequately compensated. Liability insurance is required by law in the majority of states in the U.S. to operate a vehicle. In a nutshell, it compensates for other people’s expenses in the event of an accident. The limits of liability insurance are usually written in this format: 00/00/00.

a) Liability for bodily injury (BI)

Since it’s required in practically every state, bodily injury liability coverage (BI) is by far the most popular sort of car insurance. Bodily injury insurance coverage is designed to compensate for someone else’s medical expenditures if you harm or kill them in an accident in which you are found to be at fault. This coverage may apply to you and any other drivers named on your policy.

b) Property damage (PD)

Property damage (PD) insurance will cover damage to someone else’s property that you may cause. For example, property damage liability insurance covers you if you’re at fault in an accident. It covers any damage you do to the other driver’s car or other property.

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2. Car Insurance For Physical Damage

Physical damage car insurance covers the price of repairs if your vehicle is damaged in an accident or by a falling tree branch. It is divided into two categories of coverage: collision & comprehensive, distinguished by the conditions in which your vehicle was damaged.

Car Insurance For Physical Damage
Car Insurance For Physical Damage

a) Collision Coverage

Collision insurance can help cover damage to your car as a result of a collision with another vehicle and assist in the repair or replacement of a covered vehicle. Collision insurance covers repairs to your very own vehicles if you are at fault in an accident. Even if you are the best driver in the world and did not cause the accident, there is always the possibility that you will be found partially at fault.

b) Comprehensive coverage

Comprehensive automobile insurance, commonly known as “apart from collision” and “comp” insurance, protects your vehicle against vandalism, theft, and natural catastrophe damage. All collision & comprehensive insurance claims are classified as “physical damage.” However, it may assist in compensating for damage to your car caused by events other than crashes, such as vandalism, certain weather events, and animal accidents. In a nutshell, Comprehensive coverage reimburses you if your car is lost, stolen, or damaged due to something other than an accident.

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 3. Rental Insurance

Some insurance companies cover rental cars with liability insurance. Check with your insurer before paying extra for the rental company’s car insurance. This is not the same as auto rental reimbursement coverage, which is optional insurance that pays for a temporary rental car while your car is being repaired.

4. Coverage for uninsured and underinsured motorists

These types of car insurance means:

a) Uninsured motorist coverage

If an uninsured driver hits you, uninsured motorist coverage compensates for your medical bills and auto repairs. Hit-and-run incidents and cases where the driver took the car are examples. This policy is sometimes combined with uninsured motorist coverage.

b) Underinsured motorist coverage

If you’re hit by a vehicle that doesn’t have enough insurance to cover the damage they’ve caused, this covers your medical fees and auto repair expenditures. If your claims exceed these limits, you can sue the motorist for additional compensation, but the underinsured driver may not have enough assets to cover. Underinsured coverage will help pay for unpaid medical bills or other accident-related charges. To save money, many drivers choose the minimum level of liability insurance, but this may not be enough. In the case of an accident with such a driver whose insurance is insufficient to cover the costs, underinsured motorist insurance can protect you.

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5. Medical Payments Insurance (PIP)

Medical bills after an accident can be pretty costly. However, regardless of who is at fault, medical payments coverage can assist pay for medical expenses incurred as a result of a covered accident. It’s similar to Medical payments, or personal injury protection coverage which can help pay medical bills if you or a passenger in your vehicle are injured in an accident. This type of car insurance coverage can also cover lost wages if you or a traveler is unable to work as a result of the accident, as well as burial expenses if someone in your car dies in an accident.

Conclusion

Knowing the different insurance cover types is a vital step in finding the correct policy for you. Whether you are at fault or not, auto insurances are always there to have your back in any crisis. However, to avoid any fraud, you should always directly contact the company, bypassing any sort of middleman. Most importantly, going over your past car experiences is another key way to understand your requirements.

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