{"id":5229,"date":"2021-03-15T07:58:00","date_gmt":"2021-03-15T07:58:00","guid":{"rendered":"https:\/\/www.freeway.com\/knowledge-center\/?p=5229"},"modified":"2024-09-05T16:36:03","modified_gmt":"2024-09-05T16:36:03","slug":"types-of-car-insurance","status":"publish","type":"post","link":"https:\/\/www.freeway.com\/knowledge-center\/auto\/types-of-car-insurance\/","title":{"rendered":"6 Different Types of Car Insurance & What You Should Know About Each"},"content":{"rendered":"\n

Each time your auto policy renews, you receive a packet from your insurer. The package lists exactly what your auto coverage includes and how much you pay for each type of coverage.<\/p>\n\n\n\n

Have you ever wondered about the different types of car insurance<\/a> and what they mean? This article will help you understand your coverage overview \u2014 also known as your declarations page \u2014 and give you confidence that you have the protection you need.<\/p>\n\n\n\n

Here\u2019s what you need to know about different types of car insurance<\/a>.<\/p>\n\n\n\n

Liability Insurance Coverage<\/h2>\n\n\n\n

The first and possibly most important type of auto coverage is liability. The purpose is to pay for other people\u2019s injuries and property damage if you\u2019re determined to be at fault in a wreck.<\/p>\n\n\n\n

Minimum liability coverage is required by state<\/a> laws. State laws establish the minimum requirement you need to drive legally, but it\u2019s generally a good idea to have higher limits than just the minimum requirement because injuries and property are expensive!<\/p>\n\n\n\n

Why Would I Be at Fault?<\/h2>\n\n\n\n

You probably consider yourself a relatively safe driver, so why should you worry about how much liability insurance you have? The truth is, there are a lot of ways to be at fault for a crash.<\/p>\n\n\n\n

Being at fault for an auto accident doesn\u2019t mean you did it on purpose. Instead, it means that you either caused or contributed to the circumstances that resulted in the crash. For instance, if you back out of a parking spot and hit someone, you\u2019d likely be considered at least partially responsible.<\/p>\n\n\n\n

You don\u2019t have to be 100% responsible for paying damages, either. For instance, if a crash caused $10,000 of damage and you were 50% responsible, your liability would be $5,000.<\/p>\n\n\n\n

There are certain types of accidents<\/a> where a driver is almost always fully at fault. These include hitting stationary objects, like poles, signs, a tree, or buildings. Of course, every claim is reviewed by your insurer, so you\u2019d need to go through the claims process to get specifics on a particular incident.<\/p>\n\n\n\n

Some states are known as \u201cno-fault\u201d states<\/a>. That doesn\u2019t mean no one is at fault. It means that property damages are generally paid from each driver\u2019s own policy. However, there are exceptions; if the injuries are severe enough, the at-fault driver will be responsible for paying damages.<\/p>\n\n\n\n

Bodily Injury Liability<\/h3>\n\n\n\n

This coverage is specifically to address drivers who cause injuries to others. Generally, this coverage is listed as both per-person and per-accident.<\/p>\n\n\n\n

No matter what, the coverage will not go beyond the per-accident amount. However, if only one person is injured, the maximum is the per-person amount.<\/p>\n\n\n\n

Here\u2019s an example. Let\u2019s say you rear-ended a vehicle that had two people in it. Person A\u2019s injuries cost $10,000, and person B\u2019s injuries cost $15,000.<\/p>\n\n\n\n

If your liability insurance policy is $10,000 per person and $20,000 per motor vehicle accident, the insurance company will fully cover person A\u2019s injuries, but person B will only get $10,000. You would be personally responsible for the remaining $5,000.<\/p>\n\n\n\n

The important thing to remember is that you are legally liable for the rest of the damages once the insurer pays your policy\u2019s maximum limits. You could be sued and risk your savings, retirement, house, and more. That\u2019s why having appropriate limits is essential.<\/p>\n\n\n\n

Property Damage Liability<\/h3>\n\n\n\n

Damage to other people\u2019s property is the second part of your liability coverage<\/a>. This includes fixing their vehicle if you\u2019re responsible for damages. However, it covers other things as well.<\/p>\n\n\n\n

If you hit a light post, you have to pay the city for repairs. If you hit a mailbox, you\u2019re responsible for replacing it. If you drive through a garage door instead of backing up, your liability coverage would help fix it.<\/p>\n\n\n\n

Just like bodily injury coverage, if you cause more damage than your policy maximum, you are responsible for the difference. You want to choose the correct limits for your budget \u2014 both monthly and long-term. Don\u2019t put your financial future at risk.<\/p>\n\n\n\n

Medical Payments Coverage or Personal Injury Protection<\/h2>\n\n\n\n

We\u2019ve talked about treating other people\u2019s injuries if you are at fault, but what about your own injuries?<\/p>\n\n\n\n

Often, your health policy is the first line of payment for your injuries in any situation. However, you may have medical payments<\/a> coverage or personal injury protection (PIP) listed on your policy as well.<\/p>\n\n\n\n

These coverages can help reimburse your health insurance company for some of the costs of treating your injuries, and they can also apply to the injuries of passengers in your vehicle.<\/p>\n\n\n\n

If you\u2019re injured and someone else is found at fault, their bodily injury liability coverage would pay your medical expenses.<\/p>\n\n\n

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Uninsured Motorist Coverage<\/h2>\n\n\n\n

It\u2019s a sad fact of life that not everyone has coverage. If someone else is at fault for a crash, where do you get help with your bills if they don\u2019t have insurance?<\/p>\n\n\n\n

Uninsured motorist coverage<\/a> is the answer. This type of insurance offers a specific amount of money for both injuries and property damage caused by an uninsured driver.<\/p>\n\n\n\n

If you don\u2019t have uninsured motorist coverage and someone runs into you but doesn\u2019t have insurance, you\u2019ll have to sue for damages. Often, that takes a significant amount of time and money and doesn\u2019t result in the compensation you deserve.<\/p>\n\n\n\n

Collision Insurance<\/h2>\n\n\n\n

You now know that if someone else is at fault and damages your property, their property damage liability coverage will pay for damages.<\/p>\n\n\n\n

However, if you are at fault, how do you get your vehicle repaired? This is where your collision insurance would apply.<\/p>\n\n\n\n

Collision coverage<\/a>\u00a0is half of what people often refer to as a full coverage car insurance<\/a> policy. This type of policy pays to repair your vehicle when you collide with something and are at-fault. The payment cannot be above the cash value of the car, however.<\/p>\n\n\n\n

Your collision coverage does have a deductible. This is the amount you pay, and the insurer pays the rest. For instance, let\u2019s say there was $5,000 of damage to your vehicle, and your deductible is $1,000. The insurer pays $4,000, and you\u2019re responsible for the amount of your deductible.<\/p>\n\n\n\n

Having a higher deductible can make your premium less expensive, but you don\u2019t want to put yourself in a bind if your auto needs to be repaired. Make sure you balance your monthly premium and the amount of money you\u2019ll be able to come up with in case of a car accident.<\/p>\n\n\n\n

The state does not require you to carry collision coverage, but your bank (the lienholder) will probably require it if you have a loan on the motor vehicle.<\/p>\n\n\n\n

Comprehensive Motorist Insurance<\/h2>\n\n\n\n

The other half of \u201cfull coverage\u201d is known as comprehensive insurance<\/a>. This type of policy pays to repair your vehicle, up to its cash value, in specific non-at-fault situations.<\/p>\n\n\n\n

Some common types of comprehensive claims are:<\/p>\n\n\n\n