6 Types of Auto Insurance Coverage

If someone were to ask you what was covered under your auto insurance policy, would you be able to tell them? Like most of us, you would probably have difficulty confidently answering that question. Interpreting the various types of auto insurance coverage offered under your auto insurance policy can be tricky but highly beneficial. The more you understand your policy, the more peace of mind you have, knowing you are sufficiently covered in an accident. To help you develop a better understanding of your policy, here are six types of coverage that it may include.

 

Liability Coverage

Purchasing auto liability coverage can offer you financial assistance if you are found liable for a vehicle-related incident. In most states, you must have two forms of liability coverage to meet the state’s minimum auto insurance requirements. The two forms of liability coverage offered are:

• Bodily injury liability: Bodily Injury liability coverage pays for medical expenses caused by an incident you are found at fault. For example, if you or others listed on your policy were to injure a third party with your vehicle, it would be covered under your bodily injury liability coverage. Bodily injury liability covers medical expenses, but it can also help cover the injured party’s lost wages.

• Property damage liability: Similar to bodily injury liability, if you or someone on your policy collide with another person’s vehicle or property, your property damage liability coverage will assist you in paying for repair or replacement costs.

 

Personal Injury Protection (PIP) Coverage

Unlike bodily injury liability coverage, PIP covers medical costs, lost wages, and other expenses for you, drivers listed on your policy, and passengers in your vehicle who may become injured due to a car accident—regardless of who is deemed at fault. As such, it is also referred to as “no-fault” coverage. PIP coverage is not offered in all states. Since PIP requires your insurance company to help cover expenses regardless of who’s at fault for the incident, having PIP coverage typically results in higher premium costs.

 

Collision Coverage

Damage to your vehicle from a collision with another car or object should be covered under your collision coverage. Collision coverage is typically required if your vehicle is still being financed—but once your car is paid off, you often choose to keep or remove the collision coverage from your auto policy. Although your policy may be cheaper without it, collision coverage can be beneficial in helping you cover damages to your vehicle for which you are found at fault. If a third party caused the damages, it would be up to their insurance company to cover the damages.

 

Comprehensive Coverage

Comprehensive coverage provides insurance for losses caused by anything that isn’t covered under your collision coverage, such as losses from natural disasters, riots, vandalism, and contact with an animal. For example, if a tree were struck by lightning and fell on top of your vehicle, your comprehensive coverage could help cover damage to your vehicle. Although comprehensive insurance tends to have lower premiums than collision insurance, the cost can vary depending on your deductible amount and policy limits.

 

Uninsured Motorist Coverage

A recent study by the Insurance Research Council revealed that, in the United States, roughly 1 in 8 drivers are uninsured. Having uninsured motorist coverage can ensure you are protected if your car is involved in a hit-in-run or if you get in a car accident with an uninsured third party. On the other hand, if you don’t have uninsured motorist coverage and an uninsured individual were to crash into your vehicle, resulting in significant repair costs and medical expenses, you could be financially responsible for all of your vehicle repairs and medical bills.

 

Underinsured Motorist Coverage

Much like uninsured motorist coverage, underinsured motorist coverage applies if you are involved in an accident with an individual who doesn’t have sufficient insurance to cover all of the damage to your vehicle or your medical bills. For example, if your claim exceeded the other driver’s policy limits, underinsured motorist coverage would help cover the remaining balance of the claim after the third party’s insurance limit was reached. Both underinsured and uninsured motorist coverage are required in some states, while it still remains optional in others.

If someone were to ask you what was covered under your auto insurance policy, would you be able to tell them? Like most of us, you would probably have difficulty confidently answering that question. Interpreting the various types of auto insurance coverage offered under your auto insurance policy can be tricky but highly beneficial. The more you understand your policy, the more peace of mind you have, knowing you are sufficiently covered in an accident. To help you develop a better understanding of your policy, here are six types of coverage that it may include.

 

Liability Coverage

Purchasing auto liability coverage can offer you financial assistance if you are found liable for a vehicle-related incident. In most states, you must have two forms of liability coverage to meet the state’s minimum auto insurance requirements. The two forms of liability coverage offered are:

• Bodily injury liability: Bodily Injury liability coverage pays for medical expenses caused by an incident you are found at fault. For example, if you or others listed on your policy were to injure a third party with your vehicle, it would be covered under your bodily injury liability coverage. Bodily injury liability covers medical expenses, but it can also help cover the injured party’s lost wages.

• Property damage liability: Similar to bodily injury liability, if you or someone on your policy collide with another person’s vehicle or property, your property damage liability coverage will assist you in paying for repair or replacement costs.

 

Personal Injury Protection (PIP) Coverage

Unlike bodily injury liability coverage, PIP covers medical costs, lost wages, and other expenses for you, drivers listed on your policy, and passengers in your vehicle who may become injured due to a car accident—regardless of who is deemed at fault. As such, it is also referred to as “no-fault” coverage. PIP coverage is not offered in all states. Since PIP requires your insurance company to help cover expenses regardless of who’s at fault for the incident, having PIP coverage typically results in higher premium costs.

 

Collision Coverage

Damage to your vehicle from a collision with another car or object should be covered under your collision coverage. Collision coverage is typically required if your vehicle is still being financed—but once your car is paid off, you often choose to keep or remove the collision coverage from your auto policy. Although your policy may be cheaper without it, collision coverage can be beneficial in helping you cover damages to your vehicle for which you are found at fault. If a third party caused the damages, it would be up to their insurance company to cover the damages.

 

Comprehensive Coverage

Comprehensive coverage provides insurance for losses caused by anything that isn’t covered under your collision coverage, such as losses from natural disasters, riots, vandalism, and contact with an animal. For example, if a tree were struck by lightning and fell on top of your vehicle, your comprehensive coverage could help cover damage to your vehicle. Although comprehensive insurance tends to have lower premiums than collision insurance, the cost can vary depending on your deductible amount and policy limits.

 

Uninsured Motorist Coverage

A recent study by the Insurance Research Council revealed that, in the United States, roughly 1 in 8 drivers are uninsured. Having uninsured motorist coverage can ensure you are protected if your car is involved in a hit-in-run or if you get in a car accident with an uninsured third party. On the other hand, if you don’t have uninsured motorist coverage and an uninsured individual were to crash into your vehicle, resulting in significant repair costs and medical expenses, you could be financially responsible for all of your vehicle repairs and medical bills.

 

Underinsured Motorist Coverage

Much like uninsured motorist coverage, underinsured motorist coverage applies if you are involved in an accident with an individual who doesn’t have sufficient insurance to cover all of the damage to your vehicle or your medical bills. For example, if your claim exceeded the other driver’s policy limits, underinsured motorist coverage would help cover the remaining balance of the claim after the third party’s insurance limit was reached. Both underinsured and uninsured motorist coverage are required in some states, while it still remains optional in others.