TYPES OF CAR INSURANCE

Protection from financial loss is insurance and protection from any financial loss in case of an accident or natural disaster is a car insurance policy. There are six main types of car insurance policy, which policy is better is dependent upon the requirement of the policyholder. Liability coverage covers third party damage cost. Uninsured and underinsured coverage pLan covers policyholder damage cost in case the third party policy is not enough for the damage cost. Comprehensive coverage covers damage because of natural disasters, theft, or vandalism. Collision coverage covers the damage cost of an accident with another car or any other object. PIP gives coverage in case of injury and medical expense helps to compensate medical bills of the hospital it is additional coverage.

What is car insurance?

For many people buying a new car is just like a dream. When a man does a lot of effort, hard work, spend his day and night just to come true his dream and one day the dream of buying a new car actually comes true, he is so happy he tells everyone about his car so proudly and suddenly an accident happens and his car become badly damage he is also injured now what would he do. His all efforts which he does in his life just to buy a new car are meaningless now he lost his dream, we all think like this and even him but he doesn’t need to think like this because of car insurance. Now all the cost of damage or even his medical bills is bear by the insurance company.
Telling all this story doesn’t mean to waste your time but to aware of any uncertain incident in your life and what is the importance of insurance.

Protection from any financial loss is insurance, so car insurance gives you protection against any damage due to an accident or any uncertain incident like stolen, vandalism, catch on fire, etc. It is an agreement between you and the insurance company. According to the agreement, if any incident happens with the car, the company pays an amount of money in exchange for the premium which you pay as per your plan.

TYPES OF CAR INSURANCE

Now you have decided to buy an insurance plan for your car but before purchasing any insurance plan it is important to know what type of coverage suits you and to how extent it can be beneficial for you and your family. There are different kinds of coverage plans (full coverage auto insurance) which not only protect your car against any financial loss but also pay third-party loss if you are guilty in an accident. It is very important to choose the right plan for that I describe six basic types of car insurance coverage which actually helps to choose the right plan for you.

  1. Liability insurance coverage
  2. Uninsured and underinsured motorist coverage
  3. Collision coverage
  4. Comprehensive coverage
  5. Personal injury protection
  6. Medical payment

LIABILITY INSURANCE COVERAGE

Lability insurance coverage means that the insurance company pays the third-party damage cost as a result of an accident either its car damage, property damage, or medical bill as a result of bodily injury, and the driver doesn’t need to pay any cost even if he is guilty. It actually gives financial protection to the driver but It does not pay any damage cost of the driver, maybe the other part of the policy compensates it.

What does liability insurance cover?

In states, liability car insurance covers the damage cost of the third party if the driver is guilty, however, if there is no fault of the driver in an accident then the policyholder must file a claim with their own insurance company regardless of who was at fault. In those states, drivers are typically required to purchase PIP personal injury protection which not only covers their medical expenses but their passengers’ medical expenses as well.

It covers these two components.

  1. Property damage
  2. Bodily injury

Property damage

In case of an accident, the insurance company is liable to compensate for the third-party damage cost, either its car damage or property damage. This policy repairs the third-party car or it can be replaced by the car if the damage is unrepairable. Despite it, there is a limit in the policy the coverage plan compensates up to the limit of the plan.

Bodily injury

The liability car insurance plan pays all the medical expenses in case of bodily injury, loss of income, or funeral cost of the third party due to a car accident. Like the property coverage, it pays up to the plan limit. It has also covered the policyholder legal fees if accidents result in a lawsuit.

Compensation Limit of a Coverage Plan

If we talk about the bodily injury the coverage limit varies in different states is, however, if we see in general, per person limit is the total amount of money the company will pay out of each person who has bees injured in an accident.
In property damage, the compensation limit is the maximum amount of coverage for damage done to the property. Any costs that exceed the limit become the responsibility of the at-fault driver.

Summary: liability car coverage plan covers damage cost and medical bill of survivors if the policyholder is guilty. The company pays up to the limit of the coverage plans. It can not bear any cost of policyholder damage.

UNINSURED AND UNDERINSURED INSURANCE POLICY

The uninsured and underinsured motorist coverage plan is almost the same but there is a slight difference between them. They both cover the cost of damage and the medical bill of the driver and the passengers. An uninsured coverage plan pays when the other driver is not insured in a car accident or the company denies paying the cost of damage. On the other hand, underinsured coverage pays when the other driver has the coverage plan but the compensation cost is not enough for the damage. It means damage cost is more than the coverage plan limit.

What does uninsured and underinsured coverage covers?

Uninsured and underinsured motorist insurance plans give three kinds of coverage.

1. Uninsured motorist bodily injury coverage (UMBI)

It helps to cover the medical expense resulting from a car crash caused by an uninsured driver. In some state, the policy extends to the family members of the driver or the passengers

2. Uninsured motorist property damage coverage (UMBD)

It covers the cost of damage due to the fault of the uninsured drivers. Property damage may include car repair or replace, or the property other than the car.

3. Underinsured motorist bodily injury coverage

Helps to pay for your medical bills if you are hit by an underinsured driver.

How does uninsured and underinsured coverage work?

  1. You are hit by an underinsured motorist.

  2. You file a claim for coverage with the at-fault party’s insurance company as soon as possible.

  3. If you believe the motorist is underinsured, you may also want to contact your insurance company to notify them of the situation.

  4. Your insurance company may open a claim immediately, or they may wait until the other party’s insurer has responded to your claim.

  5. If the other party’s insurance company is unable to pay all of your claim (or the other driver is uninsured), your insurance company will begin their own investigation.

  6. Once the investigation is complete, you should receive compensation based upon your policy limits if your claim is deemed valid. In states with comparative negligence, your claim may be prorated to reflect the level of fault you shared in the accident.

COLLISION COVERAGE

Collision insurance plan repair and replace the damaged car due to an accident or hit with any kind of object like a tree, wall, etc. either the driver is guilty or not. Collision coverage is a requirement by the lender if you leasing or financing your car. If you clear all your dues then it is optional to get a collision policy.

What does collision insurance cover?

  1. Collision insurance covers damage caused by hitting the other vehicle.
  2. It covers damage caused by hitting another object like a fence, wall, tree, etc.
  3. It also covers single-car accidents like rolling or falling.

What does collision insurance not cover?

  1. It doesn’t cover medical bills.
  2. Collision insurance doesn’t cover any damage which is not related to thief or vandalism.
  3. It also not covers another vehicle damage or third-party vehicle damage.

Collusion coverage limit

Collision coverage has a limit, which is the maximum amount your policy will pay toward a covered claim. Your collision coverage limit is typically the actual cash value (AVC) of your vehicle (its value minus depreciation)
Collusion coverage limit varies from state to state but the common thing in this policy is you don’t need to pay out of your pocket except for deductible. A deductible is an amount that you pay out of your pocket. The deductible varies from state to state but on whole, it starts from $500 up to $5000.
The below tables show when collision insurance covers your loss.

Scenario when collision insurance covers you

Do you have collision coverage? Are you fault Are you covered
Yes Yes Yes
Yes No Yes
No Yes No
No yes yes

Summary: collusion coverage plan covers the policyholder if the policyholder car gets damaged due to an accident or strike with any object. This policy is not affected either the policyholder is guilty or not. The policyholder doesn’t need to pay any amount out of the pocket except deductibles. This policy is compulsory for the person who is financing or leasing his car.

COMPREHENSIVE COVERAGE

Comprehensive coverage helps you to cover damage cost due to natural disasters like a tornado, dented by a run-in with a deer, spray-painted by a vandal, car theft damaged by a break-in, or crushed by a collapsing garage, among other causes. Basically, comprehensive coverage covers the damage of your car other than collision.

Like liability coverage, it is not mandatory to purchase comprehensive coverage but if a policyholder finances his car or leasing his car it would be compulsory to have this insurance policy, however, like collision coverage comprehensive insurance has also deductibles which the policyholder have to pay out of his pocket. Collision and comprehensive coverage are almost the same.

How comprehensive coverage works?

Here is an example, how comprehensive coverage covers. If a driver purchases a comprehensive coverage plan of $10000 and he got a car accident due to a natural disaster then the insurance company will pay $9000 to the driver and deduct $1000 as a deductible amount. Let’s suppose another situation where the driver doesn’t have a comprehensive insurance plan and he got into an accident due to a tornado. Will he get any compensation amount to full fill his loss? The answer is no, he has to pay all his loss by himself or if he doesn’t have enough money then he has to take a loan to replace or repair his car.

What does comprehensive insurance cover and not cover?

COMPREHENSIVE COVERAGE COVER COMPREHENSIVE COVERAGE NOT COVER
Fire
Theft Damage of car due to strike with another person’s car
Vandalism You or your passenger medical expense after accident
Natural disaster Damage to the car due to collusion
Damage car by accident
Falling object
A civil disturbance (like a riot that results in damage or destruction of your car)

Summary: comprehensive coverage plan helps to cover from damage caused by natural disasters or by God will. It has also a deductible amount other than that it is almost the same as collision coverage.

PERSONAL INJURY PROTECTION (PIP)

Personal injury protection is also known as no-fault insurance it means that the company will pay the amount either anyone is guilty or not. Personal protection is an additional plan. Suppose you have medical insurance which has a good limit but you want additional protection for that reason you can get a PIP plan for you and your family. PIP can be play if the survivor is not in a car like he or she walking along the footpath and a car hit in this situation company pays PIP to the injured person.

What does PIP covers?

• Medical expenses: PIP can cover medical and surgical treatment, dental and optometric treatment, ambulance and nursing services, medication, medical supplies, and prosthetic devices.

• Lost wages (in some cases): If you are unable to work due to accident-related injuries, PIP could help you recover lost wages.

• Substitute services (in some cases): If accident-related injuries keep you or those covered from performing household tasks, like cleaning, PIP could help pay for substitute services, like a cleaning crew.

• Funeral expenses (in some cases): If accident-related injuries result in death, PIP could help pay for funeral expenses.

What does PIP not cover?

• Vehicle damage: PIP doesn’t pay any amount of car damage.

• Vehicle theft: PIP doesn’t compensate for stolen and any part theft if you add comprehensive insurance in your policy then it can be treated according to the comprehensive insurance plan.

• Property damage: PIP doesn’t pay any amount for the property damage due to a car accident. If you are responsible for the property damage liability coverage helps you to full fill this cost.

• Medical bill that exceeds the coverage limit: PIP also doesn’t pay an exceeded amount of medical bill. Although this insurance policy is for medical coverage it is an inexpensive policy so, its limit is lower than the other medical insurance policy because of it, PIP can’t pay the amount which is beyond its limit.

Summary: personal injury protection helps to pay an amount if a person is injured within the car or outside the car. It is an additional plan for more protection. It covers not only medical bills but also lost wages, substitute service, and funeral expenses. It cannot compensate for property damage, vehicle damage, vehicle theft.

MEDICAL PAYMENT

Medical payment insurance is a part of the car insurance policy. This policy helps to pay medical expenses due to car accidents regardless of any fault. This coverage is optional, not available in every state.

What does it cover?

Medical payment covers all the medical expenses like x-ray, doctor or hospital visit, ambulance, and emergency medical technician fees. Professional nursing fees. It also pays health insurance deductible and co-pays

Coverage limit

The maximum amount the insurer will pay you is your coverage limit. you can choose it according to your need and affordability. Remember the medical expense which exceeds the coverage limit is your responsibility.

For example, a person had an accident he has the health insurance which he uses in the emergence and some of the ER visits and he also has to pay the deductible amount and co-pay in this scenario medical payment help him to all these charges and also pay his further medical expenses.
Summary: medical payment is an additional coverage plan it helps to cover medical payment due to car accidents regardless of anyone’s fault.

Summary: medical payment policy covers all the medical expenses like doctor fees, emergency, x-ray, and other medical test expenses no matter if the policyholder is guilty in an accident or not.

FAQ’S

1. What two types of coverage must a vehicle have?
In every state that requires you to have car insurance, you must have a minimum amount of liability insurance, the amount of which varies by state. Liability comprises both bodily injury liability and property damage liability.

2. What is the most important car insurance?
The most important coverage has to be your state’s minimum liability and property damage coverage.

3. What is the cheapest type of car insurance?
Third-party insurance is the minimum level of insurance you need by law. You’d expect third party only insurance to be the cheapest option as it offers the least protection of all the types of cover available, so you might be surprised to learn otherwise.

4. What is the advantage of zero depreciation car insurance?
Zero depreciation cover or ‘zero dep’ policy, offers complete coverage for your car against damages caused due to an accident without factoring in depreciation. It means if your car gets damaged following a collision, no depreciation is deducted from the coverage of any body parts of the car excluding wheels and batteries.

5. What is the best age to get car insurance?
Drivers age between 25 to 65 is the best age to get car insurance.

Conclusion

There are six basic types of insurance. what is best is depends upon the requirement of the policyholder. Insurance companies provide different coverage plans for everyone like teenage people, elders, those who don’t use a car frequently, in case of natural disasters, injured persons during car accidents, etc.

Related Topics

How Does Life Insurance Work?
Car insurance policy
CAR INSURANCE FOR COLLEGE STUDENTS
How Much is Renters Insurance
DOES CAR INSURANCE COVER THEFT