Having the best car insurance isn’t as straight-forward as one might think. For instance, insurance coverage for collision is totally different from personal injury. Before getting your car insurance, it is best to get yourself covered on all fronts. As such, it is important to take note of the five types of car insurance coverage in order for you to get the most out of your insurance premium.
Liability insurance protects you in the event you are in a car accident, and it is determined the accident is a result of your actions. In simple terms, Liability insurance covers the cost of repairing any property damaged by an accident as well as the medical bills from resulting injuries. Most states have a minimum requirement for the amount of liability insurance coverage that drivers must have.
By definition, liability insurance is “Financial protection for a driver who, while operating a vehicle, harms someone else or their property. Automobile liability insurance only covers injuries or damages to third parties and their property, not to the driver or the driver’s property.”
The two components of automobile liability insurance are bodily injury liability and property damage liability. Also, automobile liability insurance does not have a deductible.
When you’re reviewing the liability coverage options of your auto insurance policy, you should notice the different limits:
- Property damage liability limit. This is the maximum amount your insurer would pay for damages on another party’s property. The maximum payout would not exceed the limit you have declared at the onset of the policy.
- Bodily injury liability limit per person injured. This establishes a maximum payout for each individual who is injured in an accident that you cause, up to your policy limit.
- Bodily injury liability limit per accident. This sets a cap on the total amount that your insurance provider would pay out for all damages associated with a single accident you cause. It is important to set this limit high enough so that it would be enough to pay the medical expenses incurred by multiple people.
It is usually a good idea, if you can afford it, to have liability insurance that is above your state’s minimum liability coverage requirement. This is because your insurance could provide extra protection in the event you are found at fault in an accident, as you are responsible for any claims that exceed your coverage’s upper limit. You would not want to run the risk of having to pay a large amount of money because your policy limit has been exceeded.
Collision insurance typically pays for damages to your vehicle if you’re involved in an accident. When you get into an accident, you pay your deductible, and then the collision coverage of your auto insurance policy would then help pay to repair or replace your vehicle.
Here’s how it works: if there is an accident, collision coverage pays for the repairs on your car. If your car is totaled (where the cost to repair it exceeds the value of the vehicle) in an accident, collision coverage pays the value of your car. Also, if your car is older, it may not be worth carrying collision coverage on it, depending on the value.
On the other hand, if you have a more expensive car or one that is relatively new, collision insurance can help get you back to where you were before any damage to your car. Note: If you have a lien holder, this coverage is required.
Here are some factors that are considered as collisions:
- Car Crash: If your vehicle is in an accident with another vehicle, you are in a collision. Collision coverage applies to at least one of the vehicles involved. If collision coverage is not selected by the at-fault driver, he or she would not have coverage to repair their vehicle.
- Pot Hole: Because potholes are oftentimes avoidable, insurance carriers treat pothole damage as a collision. Collision coverage must be selected in order for repairs to the vehicle to be covered.
- Tree: Hitting a tree can do severe damage to a vehicle. It makes a difference how the damage occurred. A falling tree is considered a comprehensive claim. Hitting a standing tree or even a tree which fell prior to you hitting it is considered a collision.
Then again, there are some instances that are not covered by collision coverage. For example, collision insurance usually does not cover damages to your vehicle that occur when it is not being driven, such as storm damage or damage from a falling object. If you are looking to protect your car against theft, vandalism, hail damage or falling objects, you may want to consider comprehensive coverage.
Comprehensive car insurance – also famously known as fully comp cover – is one of the higher levels of protection you can get for your motor. Term Insurance can also be applied with comprehensive coverage on your car.
Liability insurance and collision coverage cover accidents but not situations such as weather damage, environmental damage (such as animal attacks), or even theft. These situations are covered by comprehensive car coverage. It is one of those things that is great to have if it fits your budget. Anti-theft and tracking devices on cars can make this coverage slightly more affordable, but carrying this type of insurance can be costly, and may not be necessary, especially if your car is easily replaceable.
Typically, comprehensive coverage may help protect your car against damages that are not related to a collision, such as:
- Natural disasters (like a hurricane or a tornado)
- Falling objects
- Damage done to your car by animals
- Civil disturbance (like a riot that results in damage or destruction of your car)
As with all insurance policies, you should check with your insurance agent to make sure what perils are included under the comprehensive coverage of your automobile insurance policy.
Personal Injury Protection
While Comprehensive coverage may be something you don’t need to purchase, Personal Injury Protection (PIP) is something you should. It is often called “no-fault” coverage because its inherent comprehensiveness pays out claims whoever is at fault in the accident. If you have PIP insurance and are hurt in accident, you can receive maximum benefits whether or not the accident was your fault. On top of medical bills and lost wages, PIP insurance can also cover expenses like transportation to medical appointments and lawn repair.
In a nutshell, PIP insurance removes the question of blame from the car insurance equation. Each driver’s policy pays for damages to that driver based solely on his or her needs. It follows that rate fluctuations are based on the frequency and severity of your car damages, not whether you are, or are not, frequently at fault.
However, it should come as no surprise that PIP insurance is more expensive than traditional insurance. Feel free to shop around for the best price, and do a cost analysis relative to the price of collision or liability insurance.
Uninsured /Underinsured Motorist Protection
When you are in an accident and the other driver is at fault, his or her liability coverage would help pay for your medical bills or damage to your car. However, if the at-fault driver doesn’t have car insurance, you may have to pay out of your own pocket for your medical bills or damage to your car.
This is where uninsured motorist coverage comes in: it may help pay for resulting costs, up to your coverage limits, when you are hit by a driver who does not have car insurance.
By definition, “uninsured or underinsured motorist protection coverage is what pays your bills when the person who ran into you does not have any insurance nor has less insurance than is needed to cover the expenses.”
Sometimes, this type of insurance is required in some states. However, this might be too much of a luxury for most people.