Types of Auto Insurance
Auto insurance is an agreement between you and an insurer that pays for damages to your car in the event of an accident. There are many types of coverage and each one can protect you in different ways.
Before you buy your policy, take some time to review the different options. Then, you can select the option that best suits your needs.
1. Liability Coverage
Liability coverage protects you against the cost of a claim or lawsuit if you cause an accident. This can include bodily injury liability, which pays for other people’s medical bills, and property damage liability, which covers damages to their cars or other properties.
The amount of liability insurance you need depends on your personal financial situation. It’s best to check with a car insurance specialist, such as SafeAuto, to help determine the right level of coverage for you and your vehicle.
Most states require drivers to have liability insurance. This helps cover the costs of injuries and damages you cause to others in an accident, up to your policy limits.
You’ll likely see these limits listed in a format such as “25/50/25.” This means that you can be sued for $25,000 per person, $50,000 per accident, and $15,000 for property damage.
This type of liability coverage can be confusing, so you’ll want to take some time to learn more about it. If you have questions, contact your local SafeAuto agent or broker.
2. Comprehensive Coverage
Comprehensive coverage, or “other than collision” insurance, is a higher-level form of auto insurance that provides more protection when it comes to unexpected events. It covers damage to your vehicle from incidents like vandalism, theft, natural disasters, and other events that are outside your control.
It pays for damage to your car resulting from these events, even if you don’t file a claim with your insurer. This type of coverage is a good choice for drivers who don’t have the financial ability to pay for repairs out-of-pocket, or for those in areas with high-risk crime and/or natural disasters.
Comprehensive coverage costs more than a liability and collision insurance. If you’re not sure if you need it, take some time to weigh the cost of it against how much you think your vehicle is worth and whether you can afford a high deductible. If the cost of comprehensive coverage is more than 10% of the actual cash value of your vehicle, it may not be worth it.
3. Collision Coverage
Cars can get damaged in many ways, and collision coverage pays to repair them to their original condition, minus your deductible. It also covers you if your car is totaled.
Often, this type of coverage is required by lenders and lessors when you finance or lease your vehicle. It may also be helpful if you drive in areas with high crash rates, or have an expensive vehicle that would cost more than it is worth to repair in the event of an accident.
Collision insurance isn’t required by law, but it can be a smart addition to your auto policy. You should review your budget, insurance premiums, and the value of your vehicle to determine whether it makes sense to add this to your policy.
However, if three to five years’ worth of collision coverage premiums would be more than the actual cash value of your vehicle, it might make sense to drop this part of your auto policy. This can save you money in the long run if you are able to make repairs or replace your vehicle out of pocket.
4. Medical Payments
MedPay is a car insurance add-on that helps pay for medical expenses, regardless of who was at fault in an accident. It’s typically optional and comes with a small price tag.
Medpay pays for the X-rays, tests, and treatments required to diagnose your injuries. It also covers a range of related costs, including ambulance fees and chiropractic care.
In the case of a crash, medical payments can save you thousands of dollars in out-of-pocket costs. Generally, this coverage kicks in to cover your medical bills, health insurance deductible, and copays up to your policy limit.
Adding this optional coverage can be a great way to get more protection from your auto insurance policy. However, it’s important to understand how this type of coverage works and whether or not it’s worth the added premium. MoneyGeek reached out to insurance experts to help us break down the facts and figure out whether or not this coverage is right for you. Here are some of the key factors to consider before deciding to purchase medical payment insurance.
5. Uninsured Motorist Coverage
Uninsured motorist coverage is a great way to cover damages if you’re involved in an accident with someone who doesn’t have car insurance. The policy pays for medical bills, lost wages if you can’t work and funeral expenses after an accident.
In addition, uninsured motorist property damage (UMPD) covers your vehicle if it’s damaged by an uninsured driver. It also covers other personal property you own, like a fence or your house, if it’s destroyed by an uninsured driver.
The costs of uninsured motorist coverage vary by state. In general, the price is a lot lower than collision or comprehensive coverage.
However, if you’re in a state with a high percentage of uninsured drivers, the cost of UM could be higher. To get the best rate, you should compare quotes from multiple insurers. Some carriers offer discounts for loyalty or taking a defensive driving course. Others give you extras such as minor accident forgiveness and pet injury coverage.
6. Underinsured Motorist Coverage
Underinsured motorist coverage (UIM) protects you when you are involved in a car accident with an at-fault driver who does not have enough insurance to fully compensate you for your damages. It works by paying the difference between your policy limit and what you incurred in medical expenses, property damage, or other damages caused by the accident.
The majority of drivers on our roads buy auto insurance with minimum bodily injury liability policy limits, which are often far below what it will cost to pay for your medical bills after an accident. This is bad news for everyone else on the road.
Uninsured motorist coverage (UM) pays for injuries and property damages when an at-fault driver does not have adequate insurance to cover your claims. It’s not a requirement in all states but it can be helpful to have if you want to avoid paying out of pocket or filing a lawsuit.
UM/UIM is required in more than a dozen states and optional in many others, so it’s always a good idea to find out what coverage your state requires and make sure you have the right amount of UM/UIM coverage for your situation. It’s also important to know that most states allow you to increase your UM/UIM limits through a process known as “stacking.” This means that you can combine the UM/UIM limits from one policy with those of another policy.
7. Rental Reimbursement
Rental reimbursement coverage is an optional add-on that pays for a rental car when your vehicle is in the shop. The coverage is usually included in a collision or comprehensive insurance policy and can be an attractive option for drivers who need a vehicle while their own car is being repaired after an accident.
It can also cover cab fare and public transit expenses, depending on your insurer. However, it will only apply when your own auto insurance policy is paying for the repairs and won’t be available if you’re in a minor car crash or your auto is in need of routine maintenance or repairs.
You should be aware of the daily and per-claim limits that typically apply to this coverage. It’s also important to assess whether it would make financial sense to spend out of pocket on a rental car while your own car is in the repair shop for a couple of weeks.
8. Windshield Coverage
If you have comprehensive insurance, your windshield and auto glass will be covered if it is damaged from natural calamities or situations that are out of your control like hailstorms or tree branches falling on your car. In these situations, you’d need to file a claim through your comprehensive insurance.
Most insurance companies offer some type of glass and windshield coverage as an add-on to your comprehensive coverage policy. Some will waive your deductible on repairable chips or cracks, while others will cover the entire cost of repair.
Some people may also want to consider adding an additional insurance coverage called Full Glass Coverage or Full Safety Glass. This is an optional endorsement, but it can be very helpful for drivers who have higher deductibles and are concerned about paying for damaged windshields.
Full glass coverage is usually an additional cost that insurance companies charge, but it’s worth it to make sure you don’t have to worry about paying out of pocket in the event of damage to your windshield. In addition, you’ll likely be able to get a better rate on your auto insurance if you have this additional coverage