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Insurance - What are the different kinds?

Published February 6, 2018

Choosing car insurance can certainly be an overwhelming experience, especially if youíre new to the game. Even if youíre not, there is an inundation of material out there that can potentially lead you astray, or have you paying for something you did not want, do not need, or worse, something that is not appropriate. Before signing up for anything, make sure you are aware of what you need, or require. There are different laws in each state for coverage for liability, for example, so get the facts straight first. Below is a list of the most common types of car insurance you can be offered.

Automotive Liability Insurance

This is mandated in most, but not all states, and is often broken down into two separate policies; Bodily Injury Coverage, and Property Damage Coverage. Bodily Injury Coverage covers the people involved in an accident you cause, but it does not cover you personally. Medical costs, lost income, and funeral expenses are covered by bodily injury coverage, and the states mandating its purchase normally mandate a minimum level of coverage, too (for example, $15,000). There are often split coverage limits within a policy too, covering the maximum payment per person in an accident, and the maximum total payment per accident.

Property Damage Coverage will pay for the repair or replacement of vehicles and items damaged in an accident. Be mindful that if the total costs exceed your insurance coverage, you will be out of pocket for the difference. Saving a few dollars in premiums could potentially cost you tens of thousands more if worst comes to worst. The penalties for driving without liability insurance are also very high.

Uninsured/Underinsured Driver Coverage

This is an optional insurance you may choose to take out in the event someone else causes an accident and hits you, and they are uninsured or underinsured.

Collision Coverage

Collision Coverage is pretty self-explanatory; it is the insurance that will cover the costs of repair to (or replacement of) your vehicle in the event of an accident, like driving into a stationary object, a rollover, or crashing into another vehicle. It does NOT cover damage to another vehicle involved in any accident, nor does it cover medical expenses for either you or other people involved in an accident. Collision coverage will more than likely have a deductible that has to be paid before the insurer will cover your costs.

Comprehensive Coverage

Comprehensive Coverage will normally pay out for damage to your car caused by events other than an accident, for example vandalism, fire, theft, damage to the vehicle should it be damaged when stolen, accidents with animals, and even acts of God, like extreme weather events and hail storms. You will have a deductible to pay as well, in addition to your annual premium. Whatís the difference between comprehensive and collision? If it is typically out of your control, comprehensive cover will likely cover it, but if you are the cause of the accident, collision will cover the vehicle damage costs.

Loan/Lease Payoff

Also known as Gap Coverage, this insurance is designed to cover the difference between the amount owed on the car and the value of the car itself. It will normally, though not always, cover the full cost of the loan or the lease payout on a vehicle, should it be totalled in an accident.

Medical Expenses Coverage

Medical expenses coverage may pay the bills for you or your passengers involved in an accident, and is again mandatory in some states.

If there is one thing to be learned from this short, but by no means exhausted list (some states also offer Personal Injury Protection, Rental Car Coverage, Miscellaneous Extras Insurance, Towing Coverage to name a few more), it is that you have to do your research. The premium is not always the most important factor; the deductible plays a big part, as does the amount the insurance provider will cover. The driverís age, gender, family status, address, driving history and experience all play a part in the premium you will pay, so of course do your research. Ask family and friends, and check out reviews online. There is really no excuse to go in with your eyes shut. Many insurance providers will offer discounts if you bundle your insurance together (including house and contents insurance, pet insurance and so on), so money is there to be saved, too.
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