Insurance coverage for automobiles is required in almost every US state, so practically every motorist will have to purchase at least some basic car insurance coverage during their lifetimes. However, there are several different types of car insurance coverage, and they all have different uses and regulations. Learning about the different types of auto insurance is the best way to make an informed decision when the time comes to purchase coverage.
Property Damage Liability Insurance
Property damage liability is basic car insurance coverage, required in a varying minimum amount depending on the state of residence. This type of policy does not cover you, your vehicle or any passengers, but instead exists to protect you if you damage another driver’s property – not only their vehicle, but also passengers, structures, fences and other physical properties that could be accidentally damaged by a vehicle. Although it may be tempting to pay for only the minimum coverage, it is important to have plenty of liability insurance in case a lawsuit is brought against you for extra damages.
Bodily Injury Liability Insurance
As the name suggests, bodily injury liability is another type of car insurance coverage that pays for damages caused by you in a vehicle accident. However, this type of car insurance coverage is beneficial in situations where the damages have been sustained by another person, instead of their property. A bodily injury claim could entail payment for hospital bills, income loss due to an injury, and accident-related pain and suffering. It is important to remember that a bodily injury liability insurance policy does not cover you or any other people on the actual policy.
Comprehensive Auto Insurance
A comprehensive auto insurance policy, often referred to as OTC Coverage or Other Than Collision, provides car insurance coverage for your vehicle in the case of damages sustained by events such as fires, vandalism, hail damages, or other natural causes that do not include collisions. Comprehensive car insurance coverage is subject to a deductible, which must be paid by the policyholder before receiving any benefits from the insurer. The amount of a comprehensive coverage deductible varies according to the policy.
Collision Coverage Policies
A collision coverage policy covers damages sustained to your vehicle as the result of a collision with another vehicle or other foreign object. Collision coverage is also subject to a deductible, which is pre-determined in the amount of the applicant’s choosing. The chosen deductible amount on a collision coverage policy can affect the price of premium payments, keeping their costs low if the deductible amount is significant enough. Collision coverage is limited to a car’s cash value, so old, damaged cars don’t benefit from much collision coverage.
When driving a newer car with multiple people on the policy, it may be wise to purchase a combination of insurance types with plenty of extra coverage. However, with older or damaged vehicles, the minimum protection may suffice. By doing a little research, it will be easy to determine the right amount of car insurance coverage for your particular situation. Remember to also factor in teenage car insurance if you have a young driver in hour household.