Are you familiar with the many types of auto insurance? It’s possible that you already know how they work. Understanding the various types of auto insurance and their coverages is a crucial first step in choosing the correct policy for you if you’re shopping for auto coverage.
However, if you are involved in an accident, having car insurance might shield you from suffering financial losses. There are various types of coverage included in auto policies. Some of these coverages might be required in the state in which you reside, while others might be optional. The fundamental types of auto insurance, how they operate, and what they cover are listed below.
1. Bodily Injury Liability (BI)
The most common form of auto insurance is bodily injury liability coverage (BI), which is necessary for almost all states. It protects you if you are at fault for an incident that results in someone else’s injury or death. Your auto insurance company comes in to cover the other driver’s funeral costs, lost earnings, and hospital costs. If the other person chooses to sue you in court, BI will even pay your legal expenses.
However, any expenses that exceed the bodily injury liability limits in your policy will be your responsibility; protection is given by your insurer up to those limits. The majority of states mandate BI limits of $25,000, however, they can differ significantly per state, from $10,000 per person in Florida to $50,000 per person in Alaska. If state law allows, you can raise your limits, but you should also think about your budget and if an accident would put your assets in danger.
Lastly, personal injury protection (PIP) and bodily injury liability are frequently confusing the public. Any injuries that you or your passengers get in an accident are covered by your insurance carrier under PIP coverage.
2. Physical Damage Car Insurance
A physical damage insurance policy covers physical harm to your property. Physical damage auto insurance pays for your repair costs when your automobile is damaged in an accident or by a tree branch that falls on it. Although it would need to be supplemented to a basic auto policy, this coverage is often provided as part of an auto insurance policy. It consists of collision and comprehensive coverages, which range according to the conditions surrounding the damage to your car.
Physical harm can result from crashes, fire, water, falling objects, lightning, wind, and other natural disasters.
3. Property Damage Liability (PD)
Property damage (PD) insurance provides coverage for any harm you might do to someone else’s possessions. For instance, property damage insurance would pay for repairs up to your policy limits if you lost control of your car and crashed into your neighbor’s home. Similar to how property damage insurance would cover an incident where you rear-end someone else’s automobile with no fault of their own.
However, the bare minimum of property damage insurance that each driver must have is set by each state. Even while it can be alluring to merely adhere to the bare minimum of property damage coverage, keep in mind that you’ll be liable for any costs that go beyond your coverage limitations.
Whether your car is covered by property damage insurance is one issue that many individuals have trouble understanding. In a nutshell, no. You’ll require one of the two physical damage auto insurance coverages, which we’ll go through below, to pay for damage to your car.
4. Personal Injury Protection (PIP)
Regardless of who was at fault in an automobile accident, personal injury protection (PIP) insurance, sometimes referred to as no-fault insurance, assists in covering losses resulting from injuries. Personal injury insurance (PIP) can assist in paying for funeral expenses or missed wages in addition to medical expenses. Remember that not all states offer this, but some do, and others demand it.
5. Collision Car Insurance
An optional insurance rider is collision coverage. If it turns out that you caused the accident, collision insurance will cover the cost of your own vehicle’s repairs. There is always a potential that you will be found to be somewhat at fault, even if you are the world’s best driver and did not cause the collision. If that’s the case, you can find yourself in a court dispute while attempting to establish your innocence. In this case, collision coverage will cover the cost of auto repairs while the insurance provider makes an effort to establish your innocence and recoup its losses.
However, when another driver is at fault in a car accident, your car’s repairs would be covered by the property damage part of that other driver’s auto insurance policy.
6. Comprehensive Car Insurance
When your car is damaged, comprehensive insurance covers the cost of repair from things like:
- Natural disasters
- Theft
- Vandalism
- Collision with an animal
For instance, comprehensive coverage, often known as “other than collision coverage,” can assist in covering the cost of repairs if you park your car under a tree and heavy snowfall causes a branch to fall and break your windshield. Similar to collision insurance, comprehensive insurance is not mandated by the state; but, if you loan or lease your vehicle, your lender could insist that you have it.
7. Underinsured/Uninsured Motorist
Uninsured or underinsured motorist coverage can assist you in covering your losses if you are hit by a driver who does not have auto insurance or who does not have enough insurance to compensate for your damages and injuries. There are three separate coverages under this insurance:
- If you or your passengers are injured in an accident with an uninsured or hit-and-run driver, uninsured motorist bodily injury coverage can assist in covering the costs of your and your passengers’ injuries.
- If your car is hit by an uninsured driver or a hit-and-run driver, uninsured motorist property damage coverage can assist in covering the cost of the damage.
- If you are involved in an accident with a driver who doesn’t have enough insurance, underinsured motorist coverage may help cover bodily injuries.
Not all states require uninsured/underinsured motorist coverage. It’s crucial to check your state’s uninsured/underinsured driver coverage minimums before purchasing any insurance.
Final Remarks
Car owners should have the common sense to select the best auto insurance solutions to reduce risk and enhance advantages. Although required liability insurance is the least expensive alternative, it does not protect the policyholder’s interests. So, while choosing an insurance plan, consider the brand and model of the automobile, how often you drive, where you live, and other criteria. However, you can select the best auto insurance plan by contrasting and evaluating various types of coverage.
You May Want to Check These Posts:
- How Does Car Insurance Work?
- Collision Car Insurance: Meaning, How It Works, What It Covers, Cost, Pros & Cons
- 5 Tips For First-Time Car Insurance Buyers
- Liability Insurance: Meaning, How It Works, What It Covers, Cost, Pros & Cons
- Comprehensive Car Insurance: Meaning, How It Works, What It Covers, Cost, Pros & Cons
