Understanding Auto Insurance Types Made Easy

Auto insurance policies vary somewhat state to state, but, that said, they are still basically the same. You'll have to know what the minimum required insurance is in your state, but from there on out it comes down to how much coverage you want.

If your primary concern is cost, you are going to be tempted by the state minimum for insurance, but that could leave you with thousands if not hundreds of thousands of dollars to pay in the event of a collision.

You are actually going to be purchasing a policy that has certain types of coverage. Most policies contain a combination of a number of different types of coverages, some required by law and some optional. Let's look at the types of coverage available to most people.

Liability Coverage

When you're responsible for a collision, liability coverage pays the cost of the other party's injuries and damages: medical, pain, mental anguish, and wage loss, as well as the damage done to their vehicle. With most packages, your defense and court costs would be covered in the event of litigation.

Most states have a minimum amount of liability you must purchase, but it is usually wise to buy more.

Comprehensive Coverage

If a vehicle with this kind of auto insurance policy is damaged in a non-auto accident (vandalism, theft, or natural disaster), the damages are covered.

Personal Injury Protection

Shortened to PIP, this is another one popularly required by governments. The driver, whether the collision is their fault or not, is covered for medical treatment.

Collision Insurance

This coverage would compensate you for any damages to your automobile caused by a collision with another vehicle or even object. Fault does not matter.

Medical Coverage

Pays the costs of treatment for injuries that are a result of a collision, regardless of fault.

Uninsured Motorist Coverage

If the driver who causes the collision does not have liability coverage on their auto insurance policy, your car insurance will cover the damages to your vehicle.

Underinsured Motorist Coverage

If the driver who causes the collision does not have enough money available on their liability insurance to cover your damages, this coverage will provide the funds for damages.

With your Auto insurance Policy, you may not need a lot of bells and whistles if you are covered elsewhere. For instance, if you have home owners insurance or health insurance that covers any injury you might have, it doesn't make much sense to pay for medical coverage again, does it?