Shopping for auto insurance can be overwhelming, especially if you don’t understand the different types of coverage available. That’s why it’s important that you learn what options you have so that when the time comes to purchase it, you’ll be well versed in all of the lingo. That means figuring out whether you’ll want liability, comprehensive, collision, personal injury protection, and/or uninsured motorist coverage.
Here’s what you need to understand about car insurance and the different types of coverage available in 2020.
1. Liability Insurance
Liability insurance covers you if you’re ever in a car accident and it turns out to be your fault. This type of insurance covers the cost of repairing things like any property that’s damaged as a result of the accident or medical bills if the other party is injured. Liability insurance is required by law in almost every state in the country and covers third parties and their property that were involved in the accident. It doesn’t, however, cover your property damage and injuries. That’s another type of insurance called collision coverage. But more on that later.
2. Comprehensive Coverage
Comprehensive auto coverage protects your vehicle from damage or theft that’s not caused by an accident, such as vandalism or an act of nature (i.e., a tree falling on your parked car). This type of coverage is pretty affordable and can save you thousands of dollars in the long run by covering things like:
- Windshield replacements
- Fire damage
- Hail damage
- Deer accidents
- Flood damage
Learn as much as you can about auto coverage so that when you’re ready to get it, you’ll know exactly what you need.
3. Collision Coverage
Collision coverage helps with damages to your own vehicle or you can get a refund for the actual cash value of the car if it ends up totaled in an accident. In the majority of states, you’ll only be covered if you’re at-fault in the accident or you’re unsure of who caused the damage. Collision coverage, while not required by state law, might be required if you take out a loan to buy a car. The financial institution you get a loan through could require that you have collision coverage so that they can protect their asset (the car) if you get into an accident.
4. Personal Injury Protection
Personal injury protection (PIP) coverage is also known as “no-fault car insurance.” This type of coverage is the most commonly required in no-fault states. PIP can help you pay for your medical costs after a car accident no matter who was at fault in the accident. PIP is required in most states to protect drivers from delayed payouts for personal injury claims and to reduce the number of lawsuits resulting from traffic accidents. Sometimes, PIP will also cover low wages due to an injury and funeral expenses. It all depends on your coverage details and your provider.
5. Uninsured Motorist Protection
Uninsured motorist protection covers drivers without liability insurance, drivers who don’t have enough liability insurance to cover medical bills and drivers whose insurance company goes out of business or denies coverage. Uninsured motorist protection coverage typically pays for things like:
- Funeral expenses
- Medical bills
- Lost wages due to the car accident
- Car damage (in some states)
- Pain and suffering compensation
There are several different kinds of uninsured motorist coverage, including uninsured motorist bodily injury (UM or UMBI), uninsured motorist property damage (UMPD), underinsured motorist bodily injury (UIM or UIMBI), and underinsured motorist property damage (UIMPD).
Learning More About Auto Insurance Coverage
Now that you know what types of auto insurance coverage are available, you can feel confident in selecting the right coverage based on your specific needs. If you recently purchased a new car, you’ll probably need comprehensive and collision insurance to ensure your car is covered in the event of an accident. Learn all you can before deciding on a provider and coverage.