Car insurance helps pay for other people’s expenses after an accident you cause. It also protects your vehicle and other property from damage caused by natural disasters or extreme weather.
Understanding the different types of car insurance coverage can help you decide which options suit your needs. Here are the six main types of coverage:
If you are held accountable for an accident, liability auto insurance covers the other person’s medical expenses and any harm done to their car or property. The type and limits of liability car insurance vary by state, but most require at least minimum levels of coverage. This covers property damage liability, which pays to replace or repair another party’s vehicle or other property damaged by your carelessness, and bodily injury liability, which pays for other people’s medical expenses and lost wages if they are hurt in an accident you cause. Some insurers offer a combination of bodily injury and property damage liability, known as combined single limit (CSL), which provides one larger limit that can be used flexibly for both types of coverage.
Liability car insurance does not pay for your own medical bills or vehicle repairs, but many drivers choose to buy whole coverage policies. A full coverage policy like Billyard Insurance Group Inc typically includes collision and comprehensive insurance. Collision insurance covers replacing or repairing your car after an accident, whether it involves another vehicle or a stationary item like a lamppost. On the contrary, comprehensive coverage assists in covering costs associated with incidents not involving collisions, such as theft, vandalism, and natural disasters. In addition, uninsured/underinsured motorist coverage and personal injury protection may be included in full coverage, depending on your state’s requirements.
Collision car insurance reimburses drivers for damage sustained to their vehicle in a collision with another vehicle or object, minus their deductible. It is usually an optional coverage that can be added to a comprehensive policy. Collision coverage does not cover damage to the car caused by weather, theft, or vandalism.
Additionally, it doesn’t pay the driver’s damages (which fall under property damage liability) when their car collides with an uninsured or underinsured motorist. The cost of repairing or replacing your vehicle is covered under collision insurance, which typically covers your actual cash value (ACV), not the market value of your car.
The type of deductible you choose for your collision coverage will impact how much you pay before the insurance kicks in, with higher deductibles offering lower premiums. You can decide how much risk you are willing to take on and how much of a financial burden you are comfortable with, which is why many people opt for a higher deductible.
If you are leasing or financing your car, the lender may require you to carry both collision and comprehensive coverage. However, as vehicles depreciate over time, weigh the cost of annual coverage against your car’s current value and determine if you are better off dropping full coverage. A licensed ERIE agent can walk you through the details of your specific insurance package to help you make the best decision.
The opposite of collision insurance, comprehensive coverage (also known as “other than collision”), pays for damage to your vehicle that isn’t the result of a traffic accident. It covers losses such as vandalism, theft, and natural disasters and can usually be added to a standard car insurance policy. Like collision, comprehensive often requires a deductible, the amount you must pay before your insurer starts paying on a covered claim. It’s also typically required if you lease or finance your vehicle since lenders and lessors want to be protected if your car is damaged by something other than a traffic accident.
It’s essential to consider the cash value of your vehicle and the cost of a comprehensive deductible when deciding whether to add it to your policy. If your car is older and has a low cash value, carrying this coverage may not make financial sense.
Many drivers are familiar with “full coverage” car insurance, a comprehensive policy that includes all state-mandated coverages and collisions. However, this is not an actual policy type and is only necessary for some drivers. Most drivers can drop comprehensive and collision coverage after their vehicle reaches a certain age.
Uninsured/Underinsured Motorist Coverage
Uninsured and underinsured motorist car insurance coverage helps pay for your costs if the other driver in an accident is uninsured or their policy limits aren’t high enough to cover damages from a crash. This coverage is usually cheaper than adding more liability insurance to your policy. There are two types of coverage available: uninsured motorist bodily injury (UMBI) and uninsured motorist property damage (UMPD).
Both types are optional add-ons to your car insurance policy, although some states require them as part of your minimum car insurance coverage. To safeguard your assets if an uninsured or underinsured motorist collides with your car, the insurance editorial team at Bankrate advises you to select UMBI or UMPD limits that closely correspond to your policy’s liability limits.
Uninsured/underinsured motorist coverage is essential because many drivers don’t have car insurance, or their policies aren’t high enough to cover the cost of a severe accident. This coverage may also help pay for your injuries if a hit-and-run driver hits you. Some states also require UM/UIM coverage if the other driver in the crash is a pedestrian. The cheapest way to get this car insurance coverage is through your state’s insurance marketplace or as an add-on to your existing policy.