Auto insurance companies offer so many different types of coverage that choosing the right level of protection for your needs can be quite an overwhelming process.
It’s vital that you maintain enough insurance coverage to protect you, your passengers and your property in the case of an accident, but you certainly don’t want to be overpaying for coverage you’ll never use.
Consider the following types of car insurance coverage and learn what you need to stay safe without paying too much in premiums.
Liability insurance covers the damage you do to others. This coverage is listed as three numbers, such as 40/60/20.
The first number indicates the amount of bodily injury coverage for each person, while the second number tells you the total amount of bodily injury coverage you will receive for each accident. The third number represents the total amount of property damage your policy will cover per accident, in this case $20,000.
Bodily injury liability can be used to pay for the driver and passengers of the other car but only if you are determined to be at fault. Property damage liability pays to replace or fix any property you destroy, including things like fences and other vehicles. Both types of liability coverage will also cover any legal expenses you have as the result of an auto accident.
Bear in mind that each individual state has its own required minimum liability coverage levels that you must meet in order to legally drive your car out on the road. However, your state’s minimum might not be right for you.
If your financial obligations from a wreck exceed your liability limits, you will have to make up the remaining debt. Your home or other assets could be used to cover this outstanding debt.
Collision & Comprehensive Insurance
Collision coverage covers the full cost of repairing or replacing your vehicle after a car accident, while comprehensive covers the cost to repair or replace your car if it is damaged by a natural disaster, theft or vandalism.
With both types of coverage, the lower your deductible, the more your policy will cost. A good rule of thumb is to choose as high a deductible as you believe you could pay out of pocket.
Neither comprehensive or collision coverage is required by any state. If you are financing your car, however, your bank might require you to have both types of insurance until you pay off your car.
Personal Injury Protection
The personal injury protection coverage is designed to cover the cost of treating the driver and passengers of the insurance policyholder’s car. This level of coverage isn’t available in all states and many people don’t need this extra insurance because they already have other health, disability and life insurance policies.
Uninsured or underinsured motorist coverage
This level of coverage pays for any medical costs if you get in an accident with a driver who doesn’t carry enough car insurance. It also pays for your treatment if you get in a wreck with a hit-and-run driver.
With so many uninsured drivers out on the road, it’s a good idea to have this coverage. It typically costs less than $40 a year and can save you financially after an accident.
Now that you understand the different types of insurance coverage, you should be able to correctly evaluate your needs and select the right level of coverage for you. To learn more about other types of car insurance read our complete guide.
Compare the cost of various auto insurance policies in the UK with the free tools at Simply Finance.