Types of Car Insurance

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When a person gets health insurance, they will often select one plan that covers most or all of their needs. Car insurance is usually a little bit different, with multiple types of car insurance available. This creates a higher amount of customization that people can put into their policies. Each state has different minimum limits for car insurance. A minimum limit is the lowest amount of car insurance a person can have in an auto insurance category. States also only require specific types of coverage. Most states in the US will require liability insurance, though some of them also require uninsured or underinsured motorist coverage, among other things.

In many cases, it is a smart plan to get more auto insurance coverage than the minimum limits. Car crashes can be expensive, and if you do not have the proper amount of coverage to pay for repairs, that can result in you paying large sums of money out-of-pocket. Many people do not have large sums of money in their savings available, however. To prevent financial hardship and drive legally, the minimum amounts of car insurance should be purchased. In many cases, it is smart to purchase additional types of coverages well.

Liability Car Insurance 

Liability car insurance is required in most states by law. This type of auto insurance plan covers expenses to another person’s vehicle or the medical expenses of other people if you are found to be at fault in an accident with them. It does not cover costs related to your own vehicle or medical expenses.

Physical Damage Car Insurance 

One type of physical damage auto insurance is called collision coverage, which will cover the costs to repair your vehicle if you are in a car crash, regardless of who is found to be at fault in the accident. Property damage coverage is also available and is generally part of a person’s liability auto insurance. A third type of insurance coverage in this category is called comprehensive insurance coverage. This protects you, in cases where natural disasters, theft, or vandalism happen to your vehicle. Each of these will have a deductible, which you choose when you purchase your policy. This deductible impacts your premium and must be paid before the car insurance company will pay for damages from a covered situation.

Rental Insurance 

If your car is in a crash or damaged by weather, rental insurance helps provide for the costs of a rental vehicle while yours is being repaired. This type of car insurance coverage can help save you a lot of money if a situation occurs.

No-Fault or Personal Injury Protection

Under no-fault insurance coverage, your own auto insurance company will pay for your expenses. Not all states are no-fault car insurance states. Personal Injury Protection, also called PIP, pays for medical expenses to the passengers in your vehicle, as well as your own. It is another term for no-fault insurance and covers your injuries regardless of who is at fault in the accident. PIP can also cover lost wages and cover costs for replacement household service expenses and replacement childcare service expenses. In some situations, it will also cover the costs of funeral expenses. Personal Injury Protection is mandatory in some states, including Michigan and New York. In most states, however, it is not mandatory.

Uninsured / Underinsured Motorist Coverage

Also required in some states, uninsured motorist coverage helps pay for expenses related to damages or injury a person receives if they are in an accident with an uninsured or underinsured driver who is deemed to be at fault for the accident. In these cases, the person you are in an accident with might not be able to pay for your damages. Without an insurance policy to cover the expenses, if they do not have the assets or money to pay out-of-pocket, you will find yourself in a tough position.

Uninsured motorist coverage and underinsured motorist coverage will help in these situations. Your own insurance company will cover your expenses. In most cases, your insurance company will seek to recover the funds from the person at fault in the accident. Underinsured motorist coverage is designed for people who do not have enough insurance coverage to pay for all of the costs of your expenses, but who do have some insurance coverage.

Final Notes

There are harsh penalties for driving without the minimum required amounts of car insurance. You can avoid fines, fees, penalties, and other significant expenses by having a valid car insurance plan. Many people choose to get more coverage than the minimum amounts required. This provides further protection for themselves and their vehicle. Keep in mind that if you are financing a car, the terms of your contract may require some insurance over the amount required by law. This can include collision coverage, comprehensive coverage, and in some cases, lease gap insurance coverage. Get free quotes for auto insurance and find the best insurance rates available for your situation here at All Insurance.

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