Exploring types of auto insurance

Posted in Auto

Auto insurance is a broad and very general term when you consider that there are multiple coverage types available, each protecting vehicle owners, drivers and/or passengers in different ways. Understanding each specific type and when it should be purchased (or not) can help you select the most practical protection for your needs — potentially saving you money. As you read the descriptions below, keep in mind that every policy is different and consulting with an independent insurance agent is the best way to choose the coverages that best align with your specific needs.

Liability Insurance

  • Overview: If an accident is determined to be your fault, liability insurance covers the cost of repairs to any property that was damaged in the accident and for any medical bills resulting from injuries from the accident. While policies clearly articulate specific limits, an insurance company will defend the policyholder as necessary above and beyond those limits
  • Best for: This type of coverage is appropriate for all owners/vehicles
  • Required? Yes

Collision Insurance

  • Overview: In the event of an accident, collision insurance will cover any related repairs to your vehicle, though the policyholder shares in a portion of the loss through his or her deductible. If your car is considered “totaled” (too costly to repair based on the vehicle’s current value), this type of insurance will reimburse the policyholder for the current value of the car. Additional coverage might be available (for an added cost) to replace the vehicle with a newer car of the same make and model.
  • Best for: This type of insurance is best for relatively new vehicles (typically less than 10 years old) and for high-end, expensive vehicles. It’s important to consider purchasing this coverage because without it, the vehicle owner is responsible for all vehicle repair or replacement costs associated with the accident if it’s determined that he or she is responsible for the accident.
  • Required? Collision insurance is only required if the vehicle is leased or there is a lien against the vehicle.

Comprehensive Insurance

  • Overview: Sometimes referred to as “Other Than Collision” coverage, comprehensive insurance covers accidental damage that typically does not result from a vehicle accident, like damage caused by fire, hail, theft and glass breakage.
  • Best for: Comprehensive insurance is appropriate for every owner who cares about the appearance and drivability of his or her vehicle. Without this type of coverage, the vehicle owner is typically responsible for all repair or replacement costs associated with accidental damage
  • Required? Comprehensive insurance is required only if the vehicle is leased or there is a lien against the vehicle

Medical Payments Coverage/Personal Injury Protection

  • Overview: State laws will determine which coverage option can be purchased. They cover a limited amount of related medical expenses for you and your passengers, no matter who is determined to be at fault for the accident.
  • Best For: This protection is appropriate for all vehicles/owners, though it is not available in all states
  • Required? In states where personal injury protection is available it’s typically required; in states without the coverage, “medical payments” coverage is generally available and provides similar protections

Uninsured/Underinsured Motorist Protection

  • Overview: Uninsured/underinsured motorist protection covers expenses related to bodily injury caused by an accident if: 1) another party is responsible for that accident and 2) if that party does not carry liability insurance, or has lower/inadequate limits on their liability insurance
  • Best For: This coverage is practical for all vehicles/owners
  • Required? This protection is required in most states

Umbrella/Excess Liability Insurance

  • Overview: These policies offer coverage beyond homeowners and auto liability protection limits. Umbrella/excess liability limits are typically $1 million or more and can protect all personal exposures, and also cover libel, slander, misrepresentation and other personal injury types
  • Best For: Typically drivers who have significant personal assets that could be seized or jeopardized as a result of catastrophic liability costs or lawsuits
  • Required? This insurance is not required

There are other coverages worth mentioning here, like Towing & Labor. This coverage pays for the cost to tow your vehicle if it becomes disabled for any reason. Transportation Expenses coverage (or Rental Reimbursement coverage) pays for your rental of a vehicle if yours is damaged due to a loss covered under the policy.

Having adequate and appropriate protections in place is critical to help ensure that your vehicle-related exposures — and the potential costs associated with them — are mitigated. Independent Insurance Agents are well-versed in each type of protection and can help you evaluate each to determine those that make the most sense based on your needs.