Auto insurance provides drivers with important and required protection in most states. Auto insurance covers vehicles like cars, trucks, motorcycles and boats. The insurance is designed to protect motorists but it also covers pedestrians and property owners who have their property damaged by an auto.
There are many types of auto insurance. I’d like to give an overview of all of them. The coverage levels of different types of insurance are easy to identify. These levels can be as high or low as required by law.
First, there are two types of auto insurance. Comprehensive and collision insurance. Collision insurance covers vehicle damage if it is involved in an accident. Comprehensive coverage provides greater protection as it covers a wider range, including theft.
It is best to start with the minimum amount, also called liability coverage. Liability insurance pays for injuries sustained by other vehicles or persons in an accident that was caused by the policyholder. In other words, liability coverage covers damage to both the vehicles of the driver and the passenger in an accident where the motorist is at fault.
Because it provides personal injury protection to those who have been injured in accidents, liability is required in many states. This insurance covers anyone who is hurt in an auto accident that they are not responsible for.
Liability does NOT include medical payments (MP), and personal injury protections (PIP). These two expenses are covered by collision insurance, which is the next level in insurance.
Personal Injury Protection provides coverage for expenses related to the vehicle’s maintenance and repairs. This includes lost wages if a person must bring a car to a mechanic and is forced to miss work.
Medical payments can be covered by insurance if the policyholder is hurt in an accident or if that treatment costs more than the personal injury coverage limits.
Collision coverage covers liability of the driver to others, personal injury protection, as well as medical payments. The policyholder’s vehicle is also covered in the event of an accident. This applies regardless of fault. Even in a one-car accident, the driver’s policy will cover any damage to his or her vehicle. The person who is found responsible for the accident and the damage to the other car are covered.
Collision insurance pays for the vehicle’s value towards the purchase price of a new vehicle if it is so damaged by an accident that it has to be replaced. However, collision insurance doesn’t cover damage to the vehicle from fire or weather.
Comprehensive coverage provides greater protection for policyholders. Comprehensive coverage covers the policyholder’s liability, PIP, MP and any damage to the vehicle in case of an accident. Comprehensive coverage will cover the purchase of a brand new vehicle for the policyholder if the vehicle is stolen, damaged or destroyed in an accident.
While comprehensive and collision coverage may protect you from the cost to replace your vehicle, it is not ideal. Because vehicles lose value over time, this is why comprehensive and collision coverage are not always available. These types of insurance only cover the value of a vehicle that has been totaled or destroyed, regardless of how much it cost to purchase the vehicle new.
But, there’s a third type that protects policyholders against this type of depreciation. GAP insurance protects you from any depreciation in the vehicle’s value.
Auto insurance can be complex. It is clear that this is why it is so important to fully understand the options available before you make a decision. There are different requirements in each state. It is important to inquire not only about what type of coverage you are buying, but also about the requirements for your state. Accidents are not planned, so they’re always a surprise. You should ensure that you have sufficient coverage to cover you and your family for unexpected events like accidents.