Shopping for auto insurance can be stressful and confusing, but it’s really not that complicated when you understand the jargon. Here are a few of the most common types of coverage you’ll see on a policy.
Liability Insurance – Most states require motorists to carry liability insurance. This type of coverage comes into play when you’re at fault in an accident. It pays for damage to other people’s property, as well as, the medical expenses of those injured in the accident. It does not cover damage to your own vehicle or your own medical expenses.
Liability Insurance also covers lawyer fees and court costs in the event you are sued. Pay attention to the coverage limitations. If your policy covers $30,000 and you total a $50,000 car, you’re on the hook for the difference.
Collision Insurance – this is the component of your policy that covers damage to your own vehicle in the event you’re in an accident, and are at fault. Normally you can expect to be reimbursed the value of your car at the time of the accident. However some carriers offer coverage that will reimburse you the amount of a newer or even a brand new car.
Comprehensive Insurance – if your car sustains damage that is not the result of an accident, comprehensive insurance will pay to repair it. Comprehensive usually covers things like: hailstorms, theft, vandalism and falling objects.
Uninsured/Underinsured Motorist Protection – in an ideal world your vehicle will be repaired by the other driver’s insurance when he’s at fault. In reality there’re a lot of people driving around without insurance. This type of coverage takes care of your vehicle if the other driver doesn’t have insurance or his insurance isn’t sufficient to cover your damages.
Medical/Personal Injury – regardless of fault, this type of coverage pays your medical bills and those of your passengers in the event of an accident. However if you have health insurance, it will normally cover your injuries as well, so you may not want to spend the money on what will essentially be redundant coverage.
Gap Insurance – sometimes referred to as loan/lease pay off insurance this type of coverage pays your remaining loan or lease balance if your vehicle is totaled. This really only makes sense if you owe more on your car than it’s worth, since your comprehensive coverage will pay you the current value.
Other Options – some insurers offer additional options like rental reimbursement (pays for a rental car while yours is in the shop) or roadside assistance. These are usually inexpensive, and worth considering.
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