The term ‘car insurance’ is used colloquially everywhere, but what does it really mean? Car insurance is a contract for financial protection provided to the insurer in case of theft or damaged car. However, insurance can be tricky and complex. It’s no surprise that choosing the right car insurance requires well-informed guidance.. Let’s understand the types of Auto Insurance, it’s coverages, policy information and more. Ready to choose the right one for you?
Car Insurance Explained: The Basics
With Auto insurance, you’re financially covered for the losses (accident, vandalism, and theft) in exchange for a premium. The coverage policy has three pillars-
- Property – It refers to the damaged car or theft of a car.
- Liability – This means offering financial coverage as compensation for others’ injuries or damages.
- Medical – In accepted scenarios, it will cover injuries or lost wages.
Standard car insurance is mandatory in many U.S. states, but requirements can vary, so it’s important to check local laws. The type of coverage you choose depends on your needs, and your premiums will be based on the level of coverage you select.
Typically, car insurance policies last between six months and a year, but they are renewable. When your policy is nearing its end, your insurer will send you a renewal notice. To continue your coverage without interruption, simply pay the premium, and your policy will be renewed.
Who is Covered in Your Vehicle Insurance?
Your auto policy covers you and your family members on your policy. This applies whether you drive your car or someone else’s car (with permission). Your policy also covers others driving your car with your consent. Your policy covers personal driving (commuting, errands, or road trips).
It doesn’t cover commercial use. No delivery driving, for example.
Ride-sharing services like Uber or Lyft? Your Car insurance policy won’t cover that either. However, some insurers offer supplemental insurance for ride-sharing at an extra cost.
Auto Insurance Types
Car insurance companies offer a range of coverages. While some are mandatory, others can be options based on your driving needs. Different states have different laws, so be privy to local laws while seeking insurance. In case you have specific needs, various car insurance types are available to cater to them.
Car Insurance Types- Standard Coverage
Every state has different Auto insurance coverage laws, with some aspects mandatory as per law.
1. Liability Car Insurance
It’s required in almost all states. As the foundation of any Car insurance policy, its coverage protects you financially if you’re legally responsible for an accident causing injury, death, or property damage. It has two types:
Bodily Injury Liability Coverage (BI)
It covers medical expenses for injuries. It also includes legal fees, settlements for lost wages, and funeral costs. Most states require BI insurance, except for Florida, New Hampshire, and Virginia (unless you opt for auto insurance).
Property Damage Liability Insurance (PD)
PD Car insurance coverage compensates for damages to someone else’s property. It pays for the repair or replacement of their vehicle and property. It also handles legal fees and settlement costs if you’re sued.
Liability car insurance does not have a deductible. The insurer covers the entire cost (up to your coverage limits).
2. Personal Injury Protection Insurance (PIP)
PIP covers medical costs for you and your passengers. It also includes coverages for lost wages and household help. It is helpful when an injured person is unable to work due to intense injury. Some policies may cover funeral expenses, too.
PIP auto insurance applies regardless of who caused the accident. It’s mandatory in states with no-fault laws, including-
- Florida
- Hawaii
- Michigan, and others.
In these states, you can’t sue the at-fault driver. This only applies if your injuries are severe or medical costs exceed state limits.
3. Medical Payments Coverage (MedPay)
MedPay covers medical expenses for you and your passengers, no matter who’s at fault. MedPay doesn’t cover lost wages. It’s optional in most states except Maine and Pennsylvania.
In some cases, MedPay acts as supplemental health insurance coverage. It will cover deductibles and co-pays after your health insurance is used.
If MedPay is your primary coverage, it covers immediate treatment costs without a deductible or co-pay.
4. Uninsured/Underinsured Motorist Coverage (UM/UIM)
UM and UIM coverages are often bundled together. They protect you if the at-fault driver lacks sufficient insurance.
- Uninsured Motorist (UM)- This overage compensates for injuries and damage if the other driver isn’t insured. It may also cover hit-and-run accidents.
- Underinsured Motorist (UIM)- This coverage kicks in when the at-fault driver’s insurance doesn’t cover the full costs.
Car Insurance Types – Optional Coverage
Some car insurance types are optional. These depend on your personal situation. While not mandatory, experts recommend these policies for full protection. Car dealerships, banks, and lenders may require them if your car is leased or financed.
1. Collision Coverage
If your car hits another vehicle or object, collision coverage pays for repairs or replacement. It also covers damage from potholes or if your car rolls over. It doesn’t cover mechanical failure. This means normal wear and tear aren’t covered.
2. Comprehensive Coverage
Comprehensive coverage pays for damage or loss caused by non-collision events. This includes-
- Fire
- Theft
- Vandalism
- Falling objects
- Natural disasters
This vehicle insurance covers repairs or replacement of your vehicle in these situations.
3. Gap Insurance
Gap insurance covers the difference between your car’s value and the loan balance. It protects you if your car is totalled or stolen. With collision and comprehensive coverage, you get full protection. This ensures you’re not left with debt for a car you can’t use.
Car Insurance Types – Additional Coverage
Some car insurance types cater to specific needs. These can be automatically included or added as a rider. Some must be purchased separately. Here are the most common add-ons available to U.S. drivers:
Accidents or Breakdowns
- Accident Forgiveness Insurance: It helps keep premiums down. It “forgives” your first at-fault accident.
- Roadside Assistance Coverage: Covers roadside services like towing, gas, and tire changes. It helps if you’re locked out or have a dead battery.
- Mechanical Breakdown Insurance: Covers major mechanical repairs not due to accidents or wear. This is like an extended warranty but for newer vehicles.
Car Replacements, Rentals, and Ridesharing
- New Car Replacement Coverage:. Pays for a new version of your car if totaled. It’s based on the value of a new car, not its depreciated value.
- Rental Car Reimbursement Insurance:. Pays for a rental car while your car is repaired after an accident. This isn’t typically included in a standard policy.
- Rental Car Insurance: Protects rental or leased vehicles with specific coverage. Do not confuse it with rental car reimbursement.
- Rideshare Insurance:. Covers you if you provide rideshare services. It fills the gap between personal and commercial coverage.
Car Parts and Equipment
- Custom Parts and Equipment Coverage (CPE):. Covers aftermarket modifications like custom parts. Usually added to collision and comprehensive coverage.
- Original Equipment Manufacturer (OEM) Coverage:, Ensures repairs use original factory parts. This endorsement is for specific make and model repairs.
- Windshield Insurance: Covers windshield repairs or replacements. Often doesn’t have a deductible.
There are other car insurance add-ons as well. For example, if you have vintage, antique, or classic vehicles, go for classic car insurance. Unlike standard policies, it pays based on an agreed value after an appraisal. Next, if you are a business that uses vehicles (cars, trucks, and vans), Commercial Auto Insurance will be a lifesaver! Lastly, if you want to include your beloved fur baby in your insurance, pet injury insurance is also available. . erks? It covers veterinary bills if your pet is injured in an accident. It also covers burial costs or replacing your pet.
Recommended read: All about Car Insurance
Final Takeaway: Choose the Right Auto Insurance Coverage with Exceed Insurance!
With an easy guide on Car insurance explained and types, choosing the right coverage is no longer rocket science. Just follow these three simple steps:
- Pick the Right Coverage
- Choose a Reasonable Deductible
- Go with a Reliable Provider
Easy-peasy! Also, the U.S. has a sea of insurance providers. Is every one of them truly top-tier? To stay away from shady agencies, Let Exceed Insurance help you navigate the options. Get the best car insurance quotes US from Exceed Insurance today and prepare for the future!
FAQs
- How can I get the best car auto insurance quotes?
To get the best rates, compare car auto insurance quotes from multiple providers. Exceed Insurance helps you find the best deals based on your needs.
- How can I find car insurance affordable for my budget?
Exceed Insurance offers options that make car insurance affordable. We help you balance cost and coverage to fit your needs.
- Can I find affordable auto insurance without compromising coverage?
Yes! Exceed Insurance offers auto insurance inexpensive options, ensuring you get the protection you need without breaking the bank.
