4 Major Types of Auto Insurance Coverage

The Major Types Of Car Insurance Explained - Purchasing auto insurance can be a challenge because to compare one auto insurance quote to another you have to know a lot about the industry's lingo. While most agents will be happy to explain the terms to you, the information below will give you a good idea of what all of those terms and figures mean on the quote you've received.

Types of Auto Insurance Coverage

What is Liability?

As you might already know, most states require that you carry a specific minimum amount of auto insurance on each vehicle you drive. In most states, that mandatory insurance is liability. Basically, liability coverage is intended to do only one thing: cover the other driver's damages when you cause an accident. That means if you don't stop at the red light and end up crashing into an oncoming car your liability insurance is going to pay for the other car's damages and will even pay for the other driver's medical bills if any are incurred.

However, liability coverage does have limits. And these limits are going to be expressed on your quote in this format: 100/300/50. The numbers may differ but their meaning will be the same. The first number refers to the maximum payout per accident for bodily injury for each person in the other car. The second number is the maximum total payout possible for bodily injury for all the injured people in the other car. The final number is the maximum in property damage that will be paid out per accident. If the damages exceed your coverage maximums, you are responsible for paying that portion of the bills yourself.

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Major Types of Auto Insurance Coverage
Major Types of Auto Insurance Coverage

What is Collision?

In most states, collision is optional unlike liability insurance. That's because collision is meant to pay for your car's damage. If you caused the accident, for example, your car repairs would need to be paid out of your own pocket if you only have liability coverage. With collision, however, you repair bills are covered by your auto insurance company. Of course, you will have to pay a deductible before your policy begins covering those damages. Collision usually does not cover any injuries you suffer as a result of the accident.

What is Comprehensive?

Auto insurance rates are going to be higher if you add on comprehensive coverage but this extra protection can be useful. While collision protects your interests if your car is involved in a wreck with another car, comprehensive insurance covers your losses caused by other things. For example, if your car is stolen. Comprehensive coverage will kick in and pay you the value of the car at the time of the theft.

What is Uninsured Motorist Coverage?

In some states, drivers are required to purchase this type of coverage, too. Basically, if you are hit by an uninsured driver, this type of coverage will cover your losses even if the other driver fails to financial compensate you for your losses. Sometimes this coverage is combined with under insured motorist coverage which pays the difference between what you are out and what the other driver's insurance would cover.

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