Wed. Jun 19th, 2024

Auto Insurance Types

Every driver needs car insurance to cover medical costs and repair bills. Common forms of auto coverage are liability, collision, comprehensive and new car replacement coverage.

Certain coverages are required by state laws or financing/leasing contracts, while others are available as options. Examples of required and optional policies include roadside assistance, personal injury protection and uninsured/underinsured motorist coverage.

Liability Insurance

Liability insurance is an agreement that balances out the financial risks associated with owning and driving a car by spreading them across two parties: an insurer (insurer) and their insured (insured). They agree to pay a premium in return for coverage of accidents up to certain limits, with most states mandating at least a minimum bodily injury and property damage coverage minimums; other states also mandate property damage liability policies as well. Furthermore, many insurers provide uninsured/underinsured motorist coverage to assist if involved in an accident with another driver without sufficient coverage (such as uninsured/underinsured motorist coverage or lack thereof).

Some insurers also offer additional optional coverages, including gap insurance, rental reimbursement and accident forgiveness. Gap insurance covers the difference between market value of your vehicle and what is still owed on it; lenders often require this form of coverage for leased cars. Other possible optional policies may include personal injury protection, mechanical breakdown insurance or new car replacement coverages.

Collision Insurance

Collision coverage will pay to repair or replace your vehicle if it’s involved in an accident – regardless of who was at fault – regardless of who caused it. In addition, this type of insurance also protects against unexpected incidents like when a tree falls during a storm and damages it. Collision policies usually come with a deductible amount which must be met before your insurer will begin paying out claims.

Collision coverage generally does not cover medical or funeral costs for you or your passengers (these costs are covered by comprehensive insurance), or damage caused by driving under the influence of drugs, alcohol, or engaging in illegal activities such as drug dealing. Most people who purchase collision coverage add rental reimbursement coverage which helps cover rental car costs while their own car is repaired – making adding it mandatory if leasing or financing your vehicle.

Comprehensive Insurance

Comprehensive car insurance (sometimes referred to as other than collision coverage) covers damages to your vehicle resulting from events other than traffic collisions, such as hail storms, falling tree branches, vandalism or theft. Comprehensive and collision policies often come together into a package policy known as full coverage – many lenders require both coverages as part of any loan agreement.

Comprehensive auto insurance should be an investment worth making unless you plan on paying cash for your car and are comfortable taking on financial risks associated with repairs. A typical comprehensive claim pays up to the actual cash value minus your chosen deductible; some insurers may set specific limits on parts of your vehicle’s total value; it is wise to read your policy and discuss them with an agent or broker to understand all available options and decide the right plan for you.

Auto Repair Insurance

Car insurance is a contract between you, as an insured party, and an insurer in which they promise to reimburse any covered losses that meet certain criteria, in exchange for paying an annual premium. Each policy offers unique limits, deductibles and terms which should be taken into consideration before purchasing one.

Certain coverages are required in some states, such as liability and collision coverages; however, medical payments and uninsured/underinsured motorist coverages are typically optional in most states.

Some insurance providers provide auto repair insurance as an add-on to standard car policies. Similar to extended warranties or service plans offered by dealers and manufacturers, auto repair insurance covers mechanical problems after the new-car warranty has expired. USAA is one provider who provides this add-on – though eligibility requirements may restrict who can purchase it due to low rates – giving drivers peace of mind that repairs will be covered if anything breaks down on the roadside. Other providers may also offer this coverage.

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