Car insurance is an insurance that covers cars, trucks, motorcycles, and other road vehicles. It is basically financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could also arise from incidents in a vehicle. You can choose the amount of protection by selecting your coverage and limits. An auto insurance policy can provide coverage for:
- Accidents
- Liability
- Medical expenses
- Property
- Vehicles
Your car insurance policy consists of multiple coverage that provides protection in different situations involving your vehicle. Coverage has different limits and may have deductibles. Specific coverage and limits may also be required by a lien holder or lender.
Types of Car Insurance Coverage
The fact that you should know when it comes to car insurance is that, there is no full coverage. However, you should choose the coverage that is right for you.
What are the different types of coverage?
Car insurance includes liability coverage, vehicle coverage, coverage for you, and other optional coverage.
Liability Coverage
Liability Coverage includes:
- Bodily Injury liability: pays damages for bodily injury or death resulting from an accident for which you are at fault
- Property Damage liability: pays for damage to someone else’s property resulting from an accident for which you are at fault
For serious accidents, you want enough insurance to cover a judgment against you in a lawsuit without jeopardizing your personal assets. Therefore, it’s a good idea to have the same level of bodily injury coverage for all your cars. You may also want to consider an umbrella policy which provides additional coverage for more serious accidents and lawsuits.
Medical Coverage
- Medical Payments coverage: may pay medical expenses related to a car accident
- Personal Injury Protection coverage: may pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident
Uninsured Motorist Coverage
- Uninsured Motorist coverage: may help compensate you for your injuries or property damage caused by a driver without insurance
- Underinsured Motorist coverage: can protect you from at-fault drivers with insufficient insurance coverage to pay your claim
Vehicle Coverage
- Collision coverage: may pay for damage to your car when it hits, or is hit by, another vehicle or other object
- Comprehensive coverage: may pay for damage to your car from theft, vandalism, flood, fire or other covered losses
You may be able to lower your premium if you select a higher deductible. If you have an older vehicle you may want to consider whether you need this coverage as they are normally limited to the cash value of your car.
How much car insurance do I need?
The right amount of auto insurance coverage comes down to your needs, budget, and state requirements. Some things to keep in mind when choosing your coverage are:
- Which coverage and limits does my state require for all drivers?
- Does my lien holder have coverage requirements?
- Do I need to protect any other assets, such as my home?
- How much can I afford to pay out of pocket at any given time?
- What is my vehicle worth now?