Federal laws tell us that in order to own a vehicle and drive it, we must have insurance. But what type is right for you? Below is a guide to common coverage types and what they include. Each state has their own minimum requirements, so make sure to discuss your needs with an agent who is familiar with your area.
This is the minimum amount of coverage allowable in most states. It covers
- medical bills from injuries
- Does not usually cover you.
- Any costs that exceed your policies coverage must be paid for by you.
DMV.org calls liability insurance the simplest way for most drivers to meet any financial responsibility requirements imposed by their state.
Some states do not require Bodily Injury Liability, which covers other people’s injuries, as long as you have a No-Fault Policy. No-fault policies are currently available in twelve-states and are a type of coverage that will pay for your losses whether or not you are liable for them. They can be quite pricey though, so other coverages may be a better fit if you have an older or less expensive vehicle.
Uninsured or Underinsured Motorist –
These cover you if the other party in an accident is liable but does not carry insurance, or has a policy that does not cover your costs.
- Other insured drivers
- Medical bills
- Bodily/personal damages
Collision Insurance –
This will cover damages to your vehicle, minus your deductible. Older cars may not be worth carrying this type of coverage for, as policies are usually based on the vehicle’s cash value.
Comprehensive Coverage –
Covers your vehicle (minus the deductible) in the event of:
- Natural causes/acts of God
According to Thursday Bram on Money Ning, this type of coverage is generally considered ‘pricey’ but can be a little less expensive if your vehicle includes anti-theft and tracking devices.
Medical/Personal Injury Protection:
Covers medical bills no matter who is at fault. However, a good health insurance plan includes more coverage areas and is probably much more useful and cost effective in the long run.
GAP (Guaranteed Auto Protection) Insurance –
This coverage pays for what is left owing to the lien holder when a vehicle that you are still paying for is totaled or stolen and un-recoverable. Other policies only cover the current, depreciated value of your vehicle. Cost will vary due to vehicle type and possible required cross-coverages (such as collision), but if you purchase it in your vehicle contract you won’t have to make separate payments.
Full Coverage Insurance –
The term Full Coverage can vary from including just –
- Enough bodily injury and property damage to cover state minimums
To also having –
- Underinsured Motorist
- Uninsured Motorist
- Loan/lease (GAP) coverage
- And even more
Costs vary depending on age, vehicle, driving record, and coverage needs, so don’t be afraid to research and discuss before locking down a policy.