What You Need to Know About the Different Types of Car Insurance

By Brittany Loeffler on July 18, 2019

Buying your first car is exciting, but there is more to it than just purchasing your vehicle. You also have to sign up for a car insurance policy. This extra monthly payment will protect you, your car, and your assets if you are ever in a car accident. However, car insurance can be confusing at times since there are so many different types out there. It’s important to find the car insurance policy that is right for you.

In this article, you’ll learn about the different types of car insurance, why they are important, and what they cover so you can decide which car insurance policy fits your needs as a new car owner.

car insurance

via Pixabay

What Is Car Insurance?

Just like any type of insurance, car insurance protects you when something bad happens, such as a car accident. Insurance will shell out the big bucks when expensive medical bills or repair costs come in so you don’t have to worry about paying out of pocket and possibly going bankrupt. Policyholders will pay a monthly premium in order to be insured.

In the United States, it is required that you have some kind of liability insurance in order to drive a car. Not only does this protect other drivers on the road if you hit them, but it protects you as well because your insurance can help with the costs rather than relying on your money and assets.

Different Types of Car Insurance 

While there is general car insurance that covers liability, there are also many other car insurance types that are essential and useful when you own a car. While driving is convenient and necessary, there are a lot of dangers on the road. There are other drivers, bad weather conditions, animals, and potholes that can damage your car and cause bodily harm.

The following is a list of different types of car insurance that will protect you in all situations you may run into while on the road.

car insurance

Infographic by Brittany Loeffler

Liability Coverage

Liability coverage is the essential car insurance drivers need. Liability coverage insures other people and their cars if you hit them while driving. It does not cover you and your car, though. So, if you are driving and hit someone’s car so that they need to have it repaired, your liability coverage will pay for those damages. That means you and the other driver do not have to pay out of pocket. Wile, it does not protect you or your car, it does protect your bank account. Another beauty of liability coverage is that there is no deductible, so your finances are greatly protected.

Every state in America requires drivers to have some sort of liability insurance. However, each state requires a different amount of coverage. For example, the state of New York requires drivers to have at least $25,000 coverage per person involved in the accident. It is a good idea to increase your amount, though, because medical bills can be expensive and whatever your insurance does not cover is up to you.

Collision Insurance

Collision insurance covers any damage that is done to your car when the accident is your fault. There is typically a deductible required for collision insurance. However, you can set the deductible amount. Depending on how low the deductible is, the higher your premium payments will be each month.

Not only does collision insurance cover damages to your car in an accident, but it also covers damages from potholes in the road and hitting something after sliding on a patch of ice in the winter. Collision insurance is also paired with liability and comprehensive insurance.

Comprehensive Insurance

While collision insurance covers damages to your car caused by hitting another car, guardrail, potholes, or sliding on ice, comprehensive insurance covers damages caused by other factors. These factors are also known as “acts of God” events. That means they are instances that just cannot be avoided. For example, a deer running in front of your car quickly and you cannot stop fast enough. Comprehensive insurance will cover the costs to repair the damages caused by the deer.

Comprehensive insurance covers instances such as animals, weather, and vandalism. So, if your car was parked in a sketchy neighborhood overnight and you find that your window was smashed the next morning, your comprehensive insurance will cover the cost to replace the window and possibly anything that was stolen from your car.

Uninsured Motorist Insurance

It may sound strange to pay for insurance to cover other drivers who are uninsured, especially when we already mentioned that every driver must have some type of car insurance. However, a recent study discovered that one in eight drivers in America is uninsured. That means that if an uninsured driver hits you and you have hefty medical bills, you can only have your own insurance to rely on and not the driver who is at fault.

If an uninsured driver hits your car this type of car insurance will cover both damage to your car and any medical bills that you may have. It also covers incidents such as hit and runs because the driver does not stop to share their car insurance information with you. While it’s important to have car insurance, not everyone does. So, take an extra precaution and add an uninsured motorist policy to your car insurance so you have peace of mind knowing that you are covered no matter what the situation.

Underinsured Motorist Insurance

Since every state sets a minimum amount for the liability insurance each driver must have when signing up for a car insurance policy, sometimes it is not enough to actually cover expenses in case of an accident. This car insurance is similar to uninsured driver insurance, but it is for drivers who are insured. This will protect you in case you end up with a lot of medical bills or hefty repair costs and the person at fault does not have enough coverage to pay for everything.

Once again, it is an insurance policy that is a good idea to take out because you always want to have peace of mind that you will be covered in the event of a bad accident.

Medical Payments Coverage

Medical bills can be quite expensive, especially when involved in a serious car accident. While health insurance can help with medical expenses, it is not guaranteed to cover everything. So, while medical payments coverage will also help cover medical expenses when you are injured in a car accident.

This medical payments coverage not only covers you, your medical and funeral expenses but also other passengers in the car at the time. This type of car insurance is not available in all states though and is an add-on policy to your regular car insurance.

It’s a good idea to sign up for this type of car insurance though because there have been cases where people have had to claim bankruptcy due to high medical bills after having been in a car accident. This will protect you and your assets in the event of costly medical bills. However, this is not available in all states, so it’s important to check with your local insurance company to see if it is available.

Personal Injury Protection Insurance

Personal injury protection insurance is different from medical payments coverage because it not only covers your medical expenses but also any income that you may lose while recovering from injuries due to a car accident. This type of car insurance is cover up to 80% of these expenses and lost income. So, that leaves you time to focus on recovering properly rather than worrying about how to pay your bills while out of work due to these injuries.

The beauty of personal injury protection insurance is that it will cover you even if you do not have health insurance. While health insurance is important and will also help you out in this situation, it’s good to know that you have some sort of coverage if you do not have health insurance. It also covers you no matter who is at fault for the accident. This type of car insurance is also required in some states, but not others. It can always be added onto your car insurance policy though if it is not required by law.

Gap Insurance

The value of a car depreciates with time. This is because cars don’t last forever and there are always new and better cars coming onto the market. So, in the event that your car is stolen or totaled in an accident, you have gap insurance coverage to help you pay off your car loan if the insurance company did not give you enough money for the car’s value. Many insurance companies will reimburse you for the current value of the car, taking into consideration the condition, age, and mileage, which as inevitably increased since you first bought it. Therefore, if you still have a large amount of your loan to pay off and the insurance company did not give you enough to pay off the loan, then gap insurance comes in and covers the difference.

It’s important to note that you do not have to pay for gap insurance if you bought your car in cash because you do not have a loan to pay off on your car.

car insurance

via Pixabay

Towing and Labor Insurance

How many times have you been driving on the highway and noticed abandoned cars on the side of the road? It can happen to anyone! Cars break down all the time. You don’t want to be stuck in that situation without some sort of comfort knowing that you can call for help. So, if you find yourself in a situation where your car is not running and you need to take it to the mechanic, towing and labor insurance will reimburse you when you call a tow truck. Depending on where you are located, a tow truck can be pretty expensive, so it’s always a good idea to have this type of car insurance to save you a good chunk of change.

Rental Reimbursement Insurance

Sometimes your car needs to be in the shop for a few days before the problem is fixed, which leaves you without a car to go through your everyday life. It can be expensive to order Uber everywhere and some places do not have great public transportation that you can rely on. So, when you find yourself without a car, there is a type of car insurance that will reimburse you for the cost of renting a car while yours is being repaired. This means your daily routine is not disrupted and you don’t have to worry about spending hundreds of dollars renting a car or trying to get around without your car.

Classic Car Insurance

Drivers with a car that is 15 years or older can take out a classic car insurance policy. This policy is specialized for older cars, especially because they may require a little more work than a newer car when it comes to repairs or getting spare parts. This type of insurance can vary depending on the type of car that you have too. If it is a valuable classic car, then the car insurance policy will be more protective and probably have a higher premium than if it was simply an older car.

Finding the Right Car Insurance For You

It’s important to find the car insurance that is right for you. That means adding on different types of car insurance to fit your lifestyle. For example, everyone should have liability insurance because it protects you when you hit someone else’s car. The next most important car insurance types are collision and comprehensive because it covers any damage to your car. The rest is simply to add extra protection for you and your car. It’s always a good idea to have medical expense coverage, though because high medical bills can impact your life greatly. When you have peace of mind about the protection of you and your car with your car insurance, that means you have found the right policy for you.

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