Auto insurance is mandatory if you want to drive your car in the United States. But how do you know what type is right for you? There are many different types of auto insurance. Some would even say that there are too many. And each type offers different coverage, for different scenarios. This article will help you decide which one is right for you.
1. Liability insurance
Liability insurance covers you in case you are involved in a car accident that you caused. It is a two-part coverage and it includes bodily injury liability and property damage liability. The first one will pay for the other party’s medical bills, while the second will pay for damage to property. It is important to know that liability insurance does not protect you or your passengers.
Most states have a minimum requirement for the amount of liability insurance coverage that drivers must have. It’s always better to get liability insurance that exceeds this minimum requirement, especially if you can afford it. This will help you in case any claims exceed your coverage’s upper limit.
2. Collision coverage
Collision coverage will pay to fix or replace your vehicle after an accident. In most states, it’s not mandatory. But your finance company might require it if you have a loan or a lease. This type of insurance comes in really handy if you have a new car or an expensive one. However, if your car is older, it might not be worth carrying collision coverage on it.
Collision insurance cannot usually be purchased without comprehensive coverage.
3. Comprehensive coverage
This type of insurance is optional, unless your lender or lessor requires you to have it. Comprehensive coverage protects your car against damage not related to an accident, such as theft, hitting an animal or natural disasters.
Although it can be costly, you can make it affordable by installing anti-theft devices or extra protection on your car.
4. Personal injury protection
Personal injury protection, or PIP, is a must! Although it’s required in only 15 states, you should always get it as it can be very useful in case you are injured in an accident. Medical bills are no joke. They can quickly turn into a twister which will blow away your finances in no time flat. PIP will take care of theses costs regardless of fault. And coverage also extends to other people listed on your policy, your family or passengers.
5. Uninsured/Underinsured motorist protection
Uninsured/underinsured motorist protection will help you in case you are involved in an accident caused by another driver who has minimum coverage or no coverage at all. This way, you will receive payment for all damages caused, even if they exceed the coverage amount. It’s important to know that it is relatively inexpensive to add uninsured/underinsured motorist protection to your policy.
6. Auto medical payments or MedPay
It is similar to PIP but more limited. MedPay only covers accident-related medical expenses for you, your passengers, household members or other policy holders.
7. Guaranteed auto protection
Your car depreciates over time. If it gets totalled in an accident, your insurer will only pay its actual value, which could be way less than what you owe on a loan or lease. Guaranteed auto protection will pay for this difference between the actual cash value of the vehicle and the amount owed on it.