Types of Auto Insurance

Types of Car Insurance Policies in the US

In the United States, it is not mandatory to have a car insurance in all the states. These few states have laws regarding ‘financial responsibility’, adhering to which an individual need to post an approved self-insurance, cash deposit or bond with the state. This is to cover the damages if he or she is a part of an accident. These states are Pennsylvania, Alabama, Mississippi, Hampshire and so on. Buying a car insurance in the United States is considered to be complex, as compared to many other countries.

Types of car insurance policies: The 5 basic car insurance policies are as follows.

Liability insurance: A liability insurance provides coverage in cases where you are involved in a covered car accident and if it is declared as a result of your fault. It covers all repair costs to any property that was damaged due to the accident as well as any medical bills due to physical injuries. The amount of liability insurance required by many states is minimal. However, as you alone are responsible in case any claims surpass your coverage limit; it is considered wise to have an amount that is higher than the minimum liability insurance required. This will be beneficial to you as it provides extra coverage if you are found at fault in an accident.

Collision coverage: A collision coverage will compensate for your car’s repairs, in the event of a covered accident. This type of insurance also pays for the value of your car, if due to an accident your car requires repairs that cost more than the value of your car. This is also termed as ‘totalled’. If your car is brand new or expensive enough, a collision coverage is definitely worth it all. It brings you back to where you were before your car was damaged in any way.

Comprehensive coverage: Damages caused to your car due to bad weather, theft, animal hit, etc. are unrelated to a covered accident. Such events are only covered in a comprehensive coverage. If it suits your budget, a comprehensive coverage is a great product to have. Tracking devices and anti-theft systems can help in making a comprehensive coverage economical and affordable. This coverage is on the higher side and is quite costly. It is not a necessity, particularly if your car is replaceable. Please note that if you have a lienholder, this type of coverage is needed.

Personal injury protection: A personal injury coverage is a protection you must have. The expenses following an accident and increase quickly. To cover these building cots, a personal injury protection is a necessity. This type of insurance covers yours as well as your passengers’ medical bills, irrespective of the accident being your fault or not. Please note that this coverage is not available in all states.

Uninsured/ Underinsured Motorist Protection: Although the laws of the state make it a necessity for all drivers to be insured, regrettably this is not how it really is. Another existing concern is that most states have a low minimum coverage needs, hence even if you have a liability insurance, it may fall short covering the entire expenses caused due to the accident. Therefore, in situations where a person is legally accountable for all the damages following an accident, in case they don’t possess a coverage, you will not receive any coverage amount or you will get a low amount coverage if your damages surpass the coverage amount. This is exactly where an uninsured/underinsured motorist protection type of coverage would be useful. Keeping in mind the amount of coverage offered by an uninsured/underinsured motorist protection, this type of coverage is considerably affordable to add to your car insurance policy.

Conclusion


To conclude, all these common types of car insurances basically offer protection to your car, you and your passengers too. Depending on the place you live in, a few of these coverages are a necessity whereas a few are optional. By understanding the requirements of your state, the type of covers offers, along with what does each type of cover offer coverage to, you will be able to make a clear decision as to what specific type of car insurance you need.

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