Common Types of Car Insurance Coverage

Tolu Gabriel
Tolu Gabriel August 4, 2021
Updated 2021/08/05 at 6:47 AM

If you experience an auto accident, you will be covered by car insurance from financial wreckage, pay to repair your car and also have your medical expenses covered. And as a driver in the United States of America, the law in fact makes it a must that you should carry car insurance.

However, as a newbie to car insurance, it is very crucial that you understand the common types of car insurance coverage. A single car insurance policy includes different types of coverage, and it is necessary that you know how each of them work.

Car insurance is not as demanding as you may think. Upon purchasing a car insurance policy, you’ll be required to select your desired coverage and the amount for each type. But if you check with your state, there are possibly legal requirements for the lowest amount you must have. So, for anything below the stipulated coverage limit, you will be ineligible.


The Most Common Types of Car Insurance

There are multiple basic car insurance coverage types that are offered by different car insurance companies with optional endorsements that can boost your protection. The common types of standard and optional car insurance coverage are such as enlisted below.


Liability Insurance

Being liable simply means that you have the legal responsibility over something. In car insurance, liability signifies injuries and damages that you caused when a car accident occurred. Liability insurance is of two types – property damage and bodily injury.


Property Damage Liability

Property damage liability covers damage to other people’s properties that you may have caused when an accident occurred. It basically means that vehicle that you hit, but can also cover items such as lamp posts, fences, mailboxes, and buildings. So, if you hit someone else’s mailbox or fence, the damages will be covered in this.

However, property damage doesn’t cover damage to your own property. You’ll have to do a more collision and comprehensive coverage to cover your own property, including those items inside your car, such as your laptops and household contents. 

Often, you’ll need renters, homeowners, or condo owners’ policy, but you’ll find insurers that may be ready to offer a small limit of personal property coverage over items inside your vehicle. Most state laws make it mandatory for individuals to purchase a minimum level of property damage liability coverage.


Bodily Injury Liability

If an accident is as a result of your own error, your bodily injury liability coverage will cover injuries sustained by the other party, their medical bills, lost wages, and suffering and pain. The coverage is not necessarily limited to you, it also extends to anyone else you have authorized to drive your car.

For instance, if you rear-end someone else’s vehicle, leading to the driver sustaining a broken leg, the coverage of your bodily injury liability will include surgery, x-rays, and time spent out of work. There are different minimum requirements provided in different states for the amount of bodily injury liability you must carry.


Vehicle Coverage

In addition to the required liability insurance, you may want to consider optional coverage types for your vehicle, especially if it is newer or more valuable. This coverage is not mandated by law, but if you have a loan or lease on your vehicle, your lender will likely require it. Talking to an agent and obtaining a quote for collision and comprehensive coverage may help you decide if the extra coverage is worth the cost to you.

Collision Coverage

Collision coverage can cover damage on your car if you hit a tree, a pole, a pothole, or another car. If your vehicle gets badly damaged in a collision, this coverage is provided to help in getting your car fixed. And if the other driver is the one at fault with the damage on your own car, the driver’s damage liability coverage will be responsible for your car repairs. Only your vehicle is covered in collision coverage, and not the other driver’s vehicle.

But if the accident is due to the normal aging of your car or as a result of mechanical failure, collision coverage will not cover your car. For instance, if your transmission dies, you will not be able to get collision insurance to fix it. Except you have a loan or lease on your car, the coverage is likely optional.


Uninsured and Underinsured Motorist Coverage

This coverage applies to your medical expenses if another driver hits you but does not have any liability coverage or does not have enough liability coverage to pay for your injuries. If you, another covered driver on your policy or someone you have allowed to borrow your car gets hit by an underinsured or uninsured motorist, this type of pays for damages. You can think of uninsured and underinsured motorist coverage as buying a liability policy to protect yourself against drivers who drive uninsured. It functions like liability coverage but is designed to pay for your own damages.

Uninsured and underinsured motorist coverage can also cover you while you are a pedestrian or if you are the victim of a hit-and-run where the at-fault driver leaves the scene and is unidentifiable. Uninsured and underinsured motorist coverage may be optional or mandatory, depending on where you live.


Comprehensive Coverage

Comprehensive coverage is sometimes called “other than collision coverage” and pays for certain types of damage not related to a collision. For example, it can cover damage resulting from fires, earthquakes, floods, vandalism, hitting a deer, falling objects or explosions and glass breakage. So if your car unexpectedly catches fire on the road or you left it outside in a hail storm, your comprehensive coverage may pay for the damages.

Comprehensive coverage is usually optional. Just like with collision coverage, if you have a loan or lease on your vehicle, you will likely be required to carry comprehensive coverage by your financial institution. Additionally, if your car is newer or more expensive, you may want to consider adding comprehensive to your policy for peace of mind.

Uninsured Motorist Property Damage (UMPD)

 There are possibilities that you may be hit by someone who doesn’t have insurance coverage. In such a situation, the uninsured motorist’s property damage will fix the property that was damaged. This would cover the repair of your own vehicle and include items inside the vehicle too, such as a damaged car seat from an accident with an uninsured motorist.

Not all states offer UMPD to car owners, and even with the coverage you’ll likely incur a small deductible which may fall between $100 and $300.

Several states require that insurance companies make available uninsured motorist coverage, both for property damage and bodily injury, which you may choose to decline in writing. If you find it hard to purchase uninsured motorist property damage, relate with your vehicle insurance company about their provision on how an uninsured motorist property damage claim would be handled. Many companies will harness your collision coverage.


Other Car Insurance Coverage Types

Rental Car Coverage

With rental car coverage, you’ll cover the cost of the rental car while you are unable to drive your own car as a result of the covered loss. The coverage however, does not automatically cover for the rental car used for vacation – well, except you have a full coverage, collision and comprehensive – but ensure to check with your provider.

The coverage is often represented by two distinct figures separated with a slash. The first one is your daily payment limit, while the second is your total limit. So, a figure such as 40/600 means that your company will cover for $40 per day, and up to $600 in total for your rental car. Also ensure to find the appropriate coverage limit for your needs with your company as most companies provide various coverage limits.

For instance, if you are looking to rent a vehicle with seating for six people, then you may need to increase your car rental limit, so that your insurance coverage will be sufficient to reimburse you for a larger and more convenient rental car if your own vehicle is not drive-able. Most companies will put a daily limit on the given days to cover for your car expenses so that you’ll consider purchasing a replacement for your vehicle if it is dashed.

New Car Replacement

 You may get a new car replacement offer from your insurance company if your vehicle is one model or newer. This is because new vehicles lose value quickly and if you do not have this coverage, you are not going to get enough from a claim settlement to replace your vehicle with another new model if it is totaled. The new car replacement is created to pay the difference between the worth of that vehicle and that of a new one of the same type.


Personal Injury Protection (PIP)

 Personal injury protection covers you and everyone else in your home when an accident occurs, irrespective of who caused it. States with no-fault law would require that you carry this type of insurance, however, at-fault states do not permit you by law to carry PIP, but may allow you purchase it for added security.

Personal injury protection also covers medical, funeral, and rehabilitation expenses. It may also cover work loss benefits or other non-medical expenses such as household services and childcare if you are unable to complete the tasks as a result of sustained injuries from an accident.  


Medical Payments Coverage (MPC)

 Medical payments coverage covers the cost of your treatment together with others with you when an accident occurred. It is strictly concerned with medical bills connected to the auto accidents, and doesn’t cover other things such as lost wages. You may also be covered by this insurance coverage if you get hit by a car on the pedestrian lane.

There is a limit covered by medical payments coverage, and it is the highest amount of money payable by the insurance company for your medical bills. The limit is often per-person.

This means that if you have $7,000 in your medical payments coverage, you simply have $7,000 per-person limit coverage in the vehicle. Perhaps you are not clear about how much medical payments coverage you need, licensed insurance personnel may help you with professional advice.

Roadside Assistance Coverage

 Roadside assistance coverage is sometimes referred to as emergency roadside service or towing coverage, and it pays for tows and service calls. Several insurance companies offer towing coverage.

This coverage covers you when your vehicle tire needs to be replaced, or your vehicle dies in the middle of the road. The coverage may spare you up to the coverage limit which is often a dollar amount and often determined by the number of miles required by a service technician to get to you.  


Gap Insurance

 Gap insurance is designed to help you cover for the difference that occurs between the depreciating value of your new car and the loan amount, since most new vehicles decrease in value after being acquired or leased, and may result in a higher loan amount than the market value of your vehicle.

You can often receive gap insurance from your lender, or purchase it from your insurance company as an endorsement on your auto insurance policy. But then, an insurance company may choose to limit how old a vehicle can qualify for gap insurance. For instance, brand new vehicles for up to two model years old may be covered by gap coverage.


How To Find The Best Car Insurance Coverage For Me

 US states have their different minimum required liability coverage amounts for drivers to carry which are indicated in three figures such as 25/50/10 that refers to liability insurance. In this example, the 25 means $25,000, and is the highest amount that may be paid for an individual’s bodily injury for an accident. 50 means the maximum payout in an accident, while 10 is the maximum payment coverage of property damage.

State minimum coverage can help keep your premiums reduced, but it can also expose you to a high level of financial stress in the situation of an at-fault accident. So, if an accident caused by you requires higher payment for repairs than your insurance limits, you’ll be required to bear the payments of the difference. This kind of coverage also doesn’t include any coverage for damage to your own vehicle and will not include medical payments or PIP coverage. You can consider higher liability limits or full coverage instead in addition to getting some optional coverage to round out your insurance policy.

Shop around to discover the best car insurance policy and compare coverage rates and types from each provider. Discuss your coverage needs with a licensed insurance agent or customer service representative for various levels of coverage that you can work with.   


FAQ – Frequently Asked Questions


How Do I Know How Much Coverage I need?

 It is very important that you know how much coverage you need, and a first step to find out if there is a loan or lease on your vehicle. If there is, then you’ll be required to carry full coverage.

For liability coverage, insurance professionals often advise individuals to purchase limits that exceed state minimum levels to secure themselves against financial strain in the situation of an at-fault accident. A licensed agent can help you out with the most suitable level of coverage.


What Is The Best Car Insurance Company?

 There is no one-fit-all answer to this as different drivers and insurance companies have their different specifications and what works best for them. There are drivers that prefer a wide range of discounts, while some others will go for specific coverage options and others will rather go for the lowest premium.

Specify what exactly you want and what works best for you and find the insurance policy that fits those needs. After discovering this, shop around for different quotes from different providers for the coverage option that suits your needs and budget.


Should I Adjust My Coverage When Adding a Teen driver?

 You should consider adding your teen who had recently obtained their license to your policy as a driver. If you also bought a car for that teen, then add the car also.  

As a result of poor driving experience, teenagers turn out to be expensive to insure, so you may want to reduce your coverage to save money when adding your teen, but insurance agents generally think this is a bad idea. Since the teens are prone to getting into accidents as a result of their lack of road experience. Leveraging on discounts is another way you can save on your insurance when adding your teen driver.




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