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types of auto insurance

When you are looking at auto insurance quotes, one of the things to consider is the various types of auto insurance and the amount of coverage you need for each. With the average insurance premium in 2020 of about $1,245 for full coverage on a medium sedan, you need to be knowledgeable about your options and what they provide.

When shopping for the best auto insurance, what comes to mind are the main three: collision, comprehensive, and liability. That is only the beginning. You also need to consider seven additional options. Keep reading to learn everything you need to know about the various types of insurance in this auto insurance guide.

Comprehensive Coverage

Sixty-Eight percent of people in the U.S. believe that comprehensive insurance covers damage to their car in the event of a collision. This is not true. Comprehensive insurance is coverage for almost any type of damage to your vehicle that is not the result of an accident.

This can be damage from severe weather or natural disasters. One of the most typical types of a comprehensive incident is when a stone chip hits your windshield, resulting in a crack. Comprehensive coverage is not required by state law, but 78% of insured drivers buy comprehensive coverage.

Collision Coverage

Collision coverage is valuable in the case of impact with another vehicle, building, guardrail, fire hydrant, or any other object. The insurance covers the repair or replacement of your vehicle. Be aware that replacement value is the current or Blue Book value.

If you have a vehicle that is older and no longer are making car payments, you may want to compare what you would receive from your insurance company and the cost for the additional premium coverage. Dropping this coverage may save you money. 

Liability Coverage

Liability insurance does not pay for the losses you personally experience in an accident. This is insurance you purchase to cover the medical expenses and property damage of the other vehicle and its occupants when you are at fault in an accident.

Every state establishes a minimum amount of liability coverage drivers must carry. Liability has several different coverage areas as shown below. Each state determines how much coverage in each area is mandatory.

It is mandatory in 49 states and Washington D.C. to have liability insurance. In New Hampshire liability insurance is not mandatory. To obtain a waiver the driver must prove the ability to pay all expenses of the other driver in the event they are at fault in an accident.

Bodily Injury

This insurance covers the injuries the other driver or their passengers sustain in an accident where you are at fault. The insurance covers the cost of their medical bills and lost wages.

Medical bills can add up quickly, and coverage normally includes:

  • Medical Bills
  • Lost Wages
  • Rehabilitation and Physical Therapy
  • Funeral Costs
  • Pain and Suffering in the event of a lawsuit award

This insurance does not provide any coverage for you or your passengers.

Property Damage

When you are at fault in a vehicle accident, the property damage portion of your liability insurance covers the repair or replacement of the other driver’s vehicle. This insurance also covers property such as mailboxes, fences, torn lawns, and flower beds, or any other property damage.

Personal Injury Protection (PIP)

Personal injury protection (PIP) pays expenses you or your passengers incur as a result of an accident. It will provide about 80% coverage of your medical expenses, rehabilitation, lost wages, and in the event of death, funeral costs.

Bodily injury coverage is for the people in the other vehicle. PIP covers you and your passengers. There are currently 17 states in which PIP coverage is mandatory.

There is no medical deductible with this type of coverage.

Underinsured Driver Coverage

This is coverage to protect you in the event you are in an accident where the other driver is at fault and only carries minimum amounts of insurance coverage. Underinsured motorist coverage is mandatory in 14 states.

The underinsured coverage will pay for your property damage, medical expenses, and lost wages if the other driver is at fault and lacks sufficient insurance.

Uninsured Driver Coverage

As scary as it is, one to three out of every ten drivers in the United States do not have any car insurance. Uninsured motorist insurance protects you in the event you are in an accident with a vehicle that has no insurance. There are 22 states in which uninsured coverage is mandatory.

This coverage will pay your damages if the other driver is at fault and has no liability coverage. It also pays if you are the victim of a hit-and-run.

Fire and Theft Coverage

This is coverage for your automobile in the event it receives damage or is totaled due to a fire or theft. There may be repeat coverage with this insurance for things such as weather damage, vandalism, flooding, earthquakes, or impact with an animal. Read the policy carefully and compare it to other areas of coverage to see if you need this coverage.

GAP Insurance Coverage

A new vehicle loses about 30% of its value within the first three months of ownership. If your car is stolen or you are in an accident in that time frame and your car is a total loss your standard insurance policy will not cover the cost of the car. The coverage will only be for the current value.

You will be responsible for the gap between what you owe on the car loan and what the current value is. That is why gap insurance is also known as loan or lease payoff insurance.

Rental Car Insurance

Your standard auto insurance may not provide coverage for rental cars. This insurance provides much the same coverage as your standard policy, including comprehensive and collision coverage. The rental car portion will refer to this as a collision damage waiver (CDW) or a loss damage waiver (LDW). It also provides liability coverage for the other driver’s property and injuries.

Pay Per Mile Insurance Coverage

With this insurance, your premium is relative to the number of miles you actually place on your car. This analysis is done using a small GPS device they install on the vehicle. The device records data regarding your driving and sends it to your insurance company.

The information allows your insurance company to determine how far your drive, the safety of the routes you take, and other information such as driving speed. The insurance company then adjusts your rates according to your driving habits.

Selecting the Best Types of Auto Insurance

The best auto insurance is not necessarily cheap auto insurance. It is the insurance that provides you with the best protection for your money. Now that you are familiar with the various types of auto insurance and what each cover, you can make an informed decision when comparing insurance costs.

When you are ready to get a quote, visit our homepage or call them number above for a quote. We are not an insurance provider. We are an online marketplace that puts you in contact with insurance agents and companies who can meet your needs.