Choosing auto insurance coverage can be intimidating, especially when you don’t understand the terminology. There are two basic types of insurance that protect your vehicle: collision and comprehensive. In addition to these two types, there are five other options available. Read on to learn more.
Who doesn’t love saving money? Just type your zip code into the free box on this page and compare online auto insurance rates now. See if you’re paying more than you need to be!
What is the difference between the two basic types of insurance?
Collision and comprehensive are the two basic types of auto insurance coverage and perhaps the two most well known to consumers. However, it can still be confusing, if you aren’t sure what you need and why you need it. There are some important differences between collision and comprehensive insurance.
Collision insurance is just as it sounds. It covers the costs when you are in a collision. The collision could be with another vehicle or with an object such as a mailbox, a fence, a guardrail, etc. When you have collision insurance, your insurance company will pay for the damages.
Comprehensive insurance is the cover-all insurance. While collision covers a collision with another vehicle or object, what about all the other things that can happen to your vehicle? Comprehensive coverage covers many other kinds of damage such as weather damage, animal collision, a falling tree, or damage due to a natural disaster.
Comprehensive coverage also provides insurance for intentional damage done by others. Vandalism damage and theft replacement are part of a comprehensive coverage. This type of policy pays the repair or replacement cost of your vehicle as needed.
Is a deductible a type of insurance?
No, a deductible is the amount of money that you pay before the insurance company pays their part of the bill. The insurance company will not pay their part, if you do not pay your part so be sure to choose a deductible that you can afford.
The higher the deductible you choose, the lower your monthly premium. Some people choose a high deductible just to save money each month, but if you choose a higher deductible, make sure you have the money available. Deductible amounts usually start at $500 and go up in $250 increments.
What are the five other types of coverage?
In addition to collision and comprehensive coverage there are five additional coverage options that are standard options with most auto insurance companies:
- Liability: The first one is liability insurance. Instead of protecting your vehicle, this cover damage to another person or their property. This is the coverage required by most state auto insurance laws. Basically, if you damage another vehicle or someone’s property, your insurance covers the damages including medical bills up to a certain limit.
- UM/UIM: Another type of coverage is Uninsured or Underinsured Motorist Protection. This type of coverage may seem unfair. Why should you have to pay to cover your vehicle is an uninsured driver causes damage? Well, it may not be fair, but it is far better than being stuck with the bill or having to go to through a lawsuit to get the payment from the other driver.
- PIP or Medical Payments: There are another type of auto insurance coverage available. This coverage will help pay for your medical expenses and those of your passengers when you are injured in an accident. It does not coverage another driver’s injuries.
The last two types of coverage are less common:
- No- Fault: No-fault insurance is only available in 12 states, but it covers damages and medical expenses for yourself and others involved in the accident regardless of fault.
- Gap Insurance: This auto loan is the last coverage type and it does as its name suggests and fills in the gaps in your insurance. It fills in if your bills exceed your coverage either in repairs, replacement, or medical bills.
How do I know what type of insurance I need?
The first way to answer this question is to find out what your state’s requirements are. Make sure you have the liability coverage required by law at the very least. However, this is typically not enough to cover the costs of an accident or the replacement of a vehicle so you may need more coverage.
If you have a lien on your vehicle, most lenders require you to have comprehensive coverage so that the vehicle can be paid off and replaced if it is totaled in an accident. Collision is good for a paid off car that still has a higher replacement value.
PIP coverage is necessary, if you don’t have any medical insurance or have a high cost medical plan. Gap insurance is a good idea only if you own several vehicles and those vehicles are close to new. Uninsured motorist coverage is a must or you could lose your vehicle and not have the money to replace it.
Whatever coverage you need, you can compare auto insurance rates right now by entering your zip code in the box!