Understanding the Different Types of Car Insurance Coverage

A paper labeled "car insurance policy" with a miniature red car placed on it and a person signing at the bottom with a pen.

Whether you need insurance for your own car, or that new car you bought for your teenager, you should have a grasp on the different types of car insurance coverage available to you before you start shopping. Different policies offer different levels of protection and come at different costs. Ideally, you’d like a policy, or combination of policies, that covers a lot, but doesn’t cost a lot. So, which types of coverage should you go for?

Liability Coverage

This is the most basic type of car insurance coverage, and most states require you to have it. Liability coverage helps pay for damages and injuries you cause to other people or their property while driving your car.

It usually includes Bodily Injury Liability, which covers the other party’s medical costs, lost income, and legal expenses after an accident, as well as Property Damage Liability, which pays for repairs or replacement of the other party’s vehicle or property.

Collision Coverage

Collision coverage helps pay for damages to your own vehicle caused by a collision with another vehicle or object. The law doesn’t require this type of coverage, but you may need it if you have a newer car that would cost a lot to repair or replace after an accident.

Comprehensive Coverage

Comprehensive coverage covers damage to your vehicle from non-collision events like theft, vandalism, or natural disasters. Like collision coverage, this type of insurance isn’t required by law, but if you have a valuable car or live in an area prone to certain types of incidents, it may be worth considering.

Personal Injury Protection

Personal injury protection, also known as PIP, helps pay for medical expenses and lost wages for you and your passengers in the event of an accident. It’s required in some states, but not all. If you already have health insurance that covers auto accidents, you may not need this type of coverage.

Uninsured/Underinsured Motorist Coverage

Unfortunately, not all drivers on the road have proper insurance coverage. This is where uninsured/underinsured motorist coverage comes in. It helps pay for damages and injuries caused by another driver who doesn’t have enough (or any) insurance to cover the costs. This type of coverage is especially important if you live in an area with many uninsured drivers.

SR-22 and FR-44 Insurance Coverage

If the person that’l hold the policy has ever been charged with certain driving offenses, like DUIs, they’ll need an SR-22 or FR-44 insurance certificate to prove they have the necessary liability coverage. These types of policies are typically more expensive and require the driver to maintain a clean driving record in order to keep their license.

Additional Coverage Options

In addition to these main types of car insurance coverage, there are also optional add-ons that you can consider, such as roadside assistance, rental car coverage, and gap insurance. These may come in handy in certain situations and can provide peace of mind for an additional cost.

The more coverage you have, the better protected you’ll be in the event of an accident, but it also means higher premiums. Start by getting the insurance that’s required by law, and then consider your personal needs and budget to determine which additional coverage options are right for you.

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