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Types of Car Insurance – Why You Need Car Insurance

For a car to be functional and safe, it is a requirement for the driver to have some form of car insurance. There are various types of car insurance. These policies vary from each other in terms of coverage, price, as well as limits for indemnity. This means that not every type of car insurance policy will be suitable for a particular driver.

To understand the difference between the various types of car insurance policies available, take a look at this article.

What is Car Insurance

What is Car Insurance

 

Car insurance is a form of financial protection against loss of property, or bodily injuries resulting from automobile accidents. It is actually a contract between the insured person and the insurance company where the former pays an agreed premium and in return agrees to receive compensation after an accident with another party, their own vehicle, their premises among others.

When this occurs, the insurance company provides compensation for the losses suffered. The person is therefore referred to as an insured party and the insurance policy itself is also called a “Policy of Indemnity”.

The Importance of Different Types of Car Insurance Policies

Car insurances are usually classified in terms of types and each type differs from others with regards to certain parameters. This means that there are various kinds of car insurance to cater for motorists with different values, needs as well as preferences.  

To mix and match between the different types of Car Insurance available is this important, especially when selecting among the best car insurance for your own vehicle or through which you want to drive.

In other words, each type of car insurance provides specific insurance coverage that is necessary for the particular vehicle or driver.

Different Types of Car Insurance

Liability Insurance

Liability Insurance

Liability insurance is one of the most basic types of car insurance for motorists to invest in. It covers the losses incurred by a third party who was involved in an accident with the insured vehicle. It also covers any damage done to that other party’s property as a result of such an incident.

It pays medical bills and provides compensation which may include either a lump sum or as monthly payments for the losses suffered by such third party. The compensation is usually agreed upon in advance.

The policy limits have different levels which might be hugely dependent on the premium amount paid. Most states require drivers to invest in this type of car insurance and it can also often be found bundled with other types of car insurance in a single package.

Liability insurance is applicable to situations where the driver is held at fault. It will be either partially or fully covered depending on whether it was his/her fault or not in causing such an accident.

Property Insurance

This type of car insurance will cover any damage caused to other people’s property as a result of the insured driver’s vehicle. This may include anything from damaged fences to other car accidents. This type of insurance also pays for any damage that might be caused by the insured’s own vehicle.

The amount paid out varies from state to state, with some even allowing up to $5000 worth of coverage. There are usually two types of property insurance; comprehensive and collision.

The former will apply even if the collision was not caused by the insured driver while the latter applies only when it’s clear that the crash is a result of negligence on the part of the insured party.

Property insurance can be purchased alongside other types of car insurance in a single package, increasing its chances for being included.

Financial Protection Insurance

Financial Protection Insurance

This kind of car insurance will pay off any outstanding loans or credits that the insured party owes. It can cover the costs for paying monthly installment and interest rates if the debt was incurred as a result of an accident with another party.

It can also cover expenses that were made in order to recover losses suffered by the insured party after an accident, such as repairing damages to the insured’s vehicle in order to be able to drive again.

Financial protection insurance is not compulsory for all states, but only some may offer it and will usually require a higher premium amount than what others might charge.

Property Damage liability Insurance

This type of car insurance is all about covering the costs for the events that lead to the insured party’s vehicle being damaged, whether it was caused by an accident or not. Usually combined with comprehensive property insurance, this type of coverage can be applied for separately as well.

The amount covered will usually depend on which state you reside in but can be applied for regardless of the state.

In some cases, where a covered driver has caused damage to other people’s property, coverage for his/her own vehicle could also apply. This is usually only applicable if the insured party was not at fault when the accident took place.

This makes this type of car insurance more comprehensive than the previous types.

Roadside Assistance Insurance

Roadside Assistance Insurance

This is usually considered to be an add-on of other types of coverage such as collision or liability but could also be purchased separately. This kind of coverage will pay for costs that were made in order for the insured driver to get his/her vehicle up and running again. The insurance will cover the towing or fixing services as well as the fuel costs for delivering any necessary parts of the car to a nearby mechanic, such as for changing tires or batteries.

This kind of coverage is usually applied only if it is added onto other types of car insurance, but can also be purchased separately by a driver who is already covered.

Emergency Accident Insurance

This will pay for the costs that occurred as a result of any specific injuries suffered by the insured party. As it is sometimes included in other types of car insurance, it might also be purchased separately at an additional cost. This can be applied for only if the insured party was actually injured during the accident.

Emergency Accident Insurance can be applied for separately from other types of auto insurance as well. This could be because it is a requirement in this particular state or that specific car insurance policy already covers it, such as with higher coverage amounts for bodily injuries than liability or collision coverage applies to.

This will pay for costs that were made in the result of any kind of injuries, including those sustained by other people and property damage. This type of coverage could be applied for separately from other types with a higher premium rate.

While PIP is required by law to be included in some states, it might not be offered at all in others. In most cases though, it can be applied for separately.

Medical Payments Coverage

Medical Payments Coverage

This will pay for the medical costs that were made as a result of any kind of accident, even those that did not take place between a car and a pedestrian or another object. This type of coverage is usually combined with other types and could also be purchased separately. 

If this policy is not included in other types of car insurance, it can be applied for separately.

Passenger Insurance

This kind of auto insurance covers the costs when a passenger in your car is involved in an accident. Depending on the driving and safety records of the insured party, this type of coverage could either be purchased separately or bundled into other types and packages.

Insurance for Law Enforcement Officers

Just like it sounds, insurance for law enforcement officers covers costs that were made as a result of any damages that were caused by him/her operating a vehicle during his/her duties. This type of coverage can either be bought separately or included in other types and packages.

Homeowners Insurance

Homeowners Insurance

This protects your home as well as any vehicles that are covered under the policy, such as cars, motorcycles and boats. Just like car insurance, it offers protection for damage caused by natural disasters and accidents alike. It is usually combined with other types of insurance and can also be purchased separately.

Comprehensive Insurance Coverage

This type of car insurance includes coverage for any damages that were made to the insured party’s vehicle as a result, such as theft or arson to name a few. Comprehensive policies are applied by itself, but may also include other types of insurance, like liability or medical payments.

Specialist Car Insurance

This type of auto insurance is available to those drivers who own antique cars that are valued at over $25,000. Specialized car insurance will cover the cost of repairs that were made to this type of vehicle if it gets damaged in an accident. This can be bought separately or combined with other types as well.

Collision Insurance Coverage

Collision Insurance Coverage

This will cover the costs that were made because another driver crashed into your vehicle. Collision insurance covers no other causes of damage and can be applied for either separately or bundled in higher coverage amounts with other types and packages. Property Damage Liability Coverage

This type of auto insurance will pay for the amount that was made as a result of any property damage that was made by your vehicle. This is usually included in higher coverage amounts for liability and collision insurance.

This type of coverage will cover all kinds of medical treatment, including both physical injuries and mental ones. While PIP is required by law to be included in car insurance policies, medical expenses can be purchased separately.

Personal Injury Protection (PIP)

This coverage is mandatorily included in all car and motorcycle policies; however, it can also be applied for separately as well. This particular type of auto insurance will cover the costs that were made in regards to bodily injuries, regardless of whether the injured person is the insured party or third parties.

Emergency Medical Protection (EMP)

This will cover the medical treatment and transportation expenses that were made as a result of any kind of accident, regardless whether it was from driving through injuries or not. This coverage can be applied for separately as well and is usually included with other types of auto insurance.

Personal Injury Liability (PIL)

 

This can be purchased separately as well and is required by law to be included in higher coverage amounts for liability insurance. This particular type of car insurance will pay for the amount that was made as a result of any bodily injuries that were made by you or your vehicle, no matter which party it was.

Bodily Injury Liability Insurance (BIL)

This type of insurance will cover the amount that was made to the third party’s bodily injuries, regardless whether you or your vehicle caused it. This coverage doesn’t include any expenses on property damage and can be purchased separately as well. Uninsured Motorist Coverage

Uninsured motorist coverage will cover the costs that were made as a result of an accident caused by another driver who does not have auto insurance or has an insufficient amount for the damages. 

This particular type of car insurance can be purchased separately and is bundled in higher coverage amounts with other types and packages.

Trailer Insurance Coverage

Trailer Insurance Coverage

 

This particular type of insurance will cover your trailer if it gets damaged, regardless whether it was caused by an accident or not. While trailer insurance can be applied for separately as well, it is usually included in higher coverage amounts with other types of auto insurance policies.

Frequently Asked Questions

Is liability and collision coverage the same thing?

These two types of car insurance actually mean completely different from one another.

Liability coverage will cover the amount that was made as a result of any bodily injuries that were made by you or your vehicle, no matter which party it was. Collision insurance covers costs that were made because of any kind of accident that was caused by another driver, regardless whether collision occurred or not.

How do you know if your car is insured?

The easiest way to find out if your car is insured or not, is by checking for your car insurance policy’s ID card. An ID card will also show you the type of coverage that your vehicle has.

Do I need full coverage car insurance?

Different states have different policies and laws regarding full coverage auto insurances. In some cases, only the bare minimum amount of auto coverage is required by law to be included in a vehicle’s policy; however, it is recommended for you to insure your car with everything that is available.

How much is the average car insurance?

The amount of your auto insurance doesn’t depend on any particular factors or things; however, it does vary from one state to another. This number can also change depending on the kind and type of car you have, where you live in or even your driving score.

As a rule of thumb, an older car will result in an affordable annual insurance. You should also keep in mind your driving record and the kind of vehicle you have when looking for auto insurance quotes.

How do I get different types of car insurance?

If you really want to protect your auto from any losses and damages, it is best if you apply for the highest coverage amounts available. This type of protection will cover everything that might arise as a result from an accident or other incidents. However, this would also increase your annual premium amount.

Conclusion

As we mentioned above car insurance is an important component of protecting your auto from any losses and damages. Hope that this article was helpful and provides more car insurance related information!

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