Basic Types of Auto Insurance Coverage

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Before you buy auto insurance, you should know something about the different types of coverage. This guide described the different components of a basic auto insurance policy, as well as several types of optional coverage.

Bodily Injury Liability Protection

Bodily injury liability protection covers injury or death of the other party if you cause an accident.

Collision Auto Insurance Coverage

Collision auto insurance coverage will help pay for repairs (minus the deductibles) when your car is hit by another vehicle or object. If you have an older car, consider dropping collision auto insurance coverage, as it is usually limited to the cash value of your vehicle. Medical payments coverage covers medical expenses incurred if your or anyone riding in your car is injured. If you are a pedestrian hurt by a vehicle, this coverage should help pay your medical bills.

Comprehensive Auto Insurance Coverage

Comprehensive auto insurance coverage protects your car from damage caused by other incidents, not collision auto insurance coverage. If, for example, your car is damaged in a flood, comprehensive auto insurance coverage will help pay for repairs, minus the auto insurance deductible. Your deductible is the amount you pay out of pocket before the insurance company will pay for repairs. The lower the deductible is, the higher the monthly premiums you will pay. You should get a deductible that is affordable for you.

Under comprehensive auto insurance coverage, your insurer pays for damage to your car from all causes, other than collision, such as theft, fire, flood, windstorm, glass breakage, vandalism, hitting or being hit by an animal, or by flying objects. If your car is stolen, comprehensive auto insurance coverage provides an amount specified in your policy for expenses such as rental car or public transportation. Comprehensive and collision deductible options generally offered are $100, $200 (standard), $250, $500 and $1,000.

Full Coverage Auto Insurance

Full coverage car insurance is a policy that contains basic liability insurance, collision coverage, and comprehensive vehicle coverage. It may also contain components of bodily injury protection and optional coverage like rental car and towing reimbursement.

Liability Auto Insurance Coverage

Liability auto insurance covers you if the other party involved in the accident should file a lawsuit against you. Make sure you obtain enough to cover any judgment against you so you can protect your assets. Liability auto insurance only protects the other party in the accident, not injury to you or your vehicle.

Personal Injury Protection (PIP)

Personal injury protection, also known as PIP covers injuries caused to a driver and their passengers in the event of an accident.

Property Damage Liability Coverage

Property damage liability auto insurance protects you if your vehicle damages another person's property. This usually would be their car, but it could be a fence or a house. This auto insurance coverage may pay for legal counsel if the other party files a lawsuit against you. Make sure you have enough property damage liability auto insurance to cover the damage your car could do to someone's property.

Rental Car Reimbursement & Towing Reimbursement Coverage

You may need to rent a car while yours is in the shop after an accident. Rental car reimbursement coverage covers this expense for a period. This rental car reimbursement coverage is usually inexpensive and easy to add to your car insurance policy.

If your car needs towing or you need emergency roadside service, towing reimbursement coverage should take care of this. Contact the towing service and the insurance company will reimburse you up to your policy limit for towing reimbursement coverage.

Uninsured Motorist Coverage

Some drivers have no insurance or not enough, therefore it is a good idea to have uninsured motorist bodily injury protection. Uninsured motorist coverage covers bodily injuries.

In some states, uninsured motorist property damage coverage helps pay for damage to your vehicle. Personal injury protection (PIP) insurance covers the medical and funeral expenses of the insured, passengers and pedestrians struck by the insured.

Choosing the Right Auto Insurance Coverage

The key to getting auto insurance coverage that is right for you is to consider what insurance you need and what you can afford. Your car insurance should fit your budget and protect you, your family and your assets. Ask an agent what optional coverage is available. Buying more bodily injury liability coverage is an option you might consider if you want more protection for your assets. You might have higher assets to protect, and you can probably buy higher limits of bodily injury liability coverage.

Another option is property damage liability auto insurance. The requirement for property damage liability may be $10,000; however, many cars are worth more. With the high cost of replacing or repairing a car, you might want property damage liability auto insurance with higher than the minimum limit. Property damage limits ($15,000, $25,000, $50,000 and higher) are usually available for a higher premium.

Consider the option of buying more personal injury protection over that required by law. For a higher premium, you may be able to purchase additional uninsured motorist bodily injury coverage. If you have an accident with another vehicle that is insured but has bodily injury liability limits lower than yours, or if the vehicle has no insurance, this coverage will be activated if you have it.

With optional collision auto insurance coverage, your insurer pays for damage to your car caused by a collision with another car or object. If you are in an accident where the other party is at least partly at fault, you may be able to recover damages by making a claim against the other vehicle’s property damage liability insurance for the damage that is the other driver's fault.

Other Auto Insurance Coverage Options

Insurance will usually not pay for more than the actual value of your car at the time of an accident including depreciation. Some insurers offer replacement coverage and will pay to replace a vehicle with a new one the same make and model. This coverage usually applies, for example, up to 6 months after the purchase of the car.

Some auto insurance companies offer medical insurance which pays medical and/or funeral expenses for you and a passenger in your car, if an accident occurs (up to stated limits.) Accidental death and dismemberment coverage may be available in addition to any amounts collected under the no-fault, liability insurance and other parts of the policy.

While the automobile liability insurance policy provides coverage for everyone in your car who is hurt in an accident caused by a driver’s negligence, it will probably not provide any liability auto insurance coverage when the injured passenger is your spouse. If the insurer offers spousal liability insurance coverage, it covers the liability of an insured because of the death of or injury to his or her spouse for the limits in the policy. Ask an agent about this optional coverage and whether there is an additional premium or if the insurance company provides this at no charge.

Your insurance company should send you a notice of the options available with an explanation and the additional premiums. Optional coverage available from some companies are towing reimbursement coverage and labor coverage, extended transportation coverage (rental reimbursement) and mechanical breakdown coverage. Contact an agent to talk about whether it would be worthwhile to purchase them.