October 2018
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Types of Car Insurance
The multiple facets of vehicle insurance policies

Even though many drivers have auto insurance, only some of them clearly comprehend what different types of coverages mean. Decipher the unique types of car insurance to understand the various components of your personal vehicle insurance policy.  

Collision

As Money Under 30 contributor Kevin Mercadante articulates, collision coverage simply refers to insurance that covers your vehicle for damages. It applies whether you or another driver caused the accident. 

Comprehensive

Both collision and comprehensive insurance are usually lumped into the same package, as WalletHub contributor Richie Bernardo relates. Comprehensive insurance protects your vehicle from damages that occur outside of the realm of conventional collisions. For example, it will cover damages from a natural disaster, falling object or theft.

Liability

This insurance pays for the other driver’s vehicle repairs and medical bills if you are responsible for an accident. It’s important to note that liability insurance only covers the other driver and their vehicle, not you and your vehicle, as Bernardo highlights.

Personal Injury Protection

PIP covers medical expenses for you, as well as other passengers and family members riding with you, during an accident. As Bernado expresses, this insurance will safeguard you whether or not the collision was your responsibility (which is why some people refer to it as “no-fault insurance”).

Auto Medical Payments

An alternative to personal injury protection, auto medical payments insurance acts as a health insurance extension, provided you have health insurance. If you don’t have health insurance, it can be a great option to help cover medical expenses in the wake of an accident. Although PIP and auto medical payments insurance types generally cover the same things, there is one key difference. Only PIP provides payments for loss of income, as stated on the DMV’s website.

Uninsured/Underinsured Motorist Coverage

Even though auto insurance is a legal requirement in every state, not every U.S. driver has it. The uninsured/underinsured motorist coverage helps shield you from the consequences of getting in an accident with an uninsured driver. As Bernado states, it covers medical expenses if you and your passengers were injured by either an uninsured driver or underinsured driver.

Guaranteed Auto Protection

GAP insurance is a wise investment if you loan or lease your vehicle. Auto insurers pay only the car’s actual cash value for a vehicle, rather than the total amount of the loan or lease, as Bernado articulates. This can result in a “gap” that you need to pay out of pocket if you don’t have this type of insurance. If you do have it, however, this coverage will finance the “gap” fee.

Usage-Based Insurance

This type of insurance offers an alternative way of paying for auto insurance. Usage-based insurance requires policy owners to let the insurance company track their driving habits and vehicle’s mileage. The insurer will then supply you with discounts based on these two factors.

With a basic understanding of the different varieties of auto insurance, you can better navigate which types of coverage you need. You can also look into purchasing additional coverages that your current policy lacks so you can have more confidence on the road.



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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.  This is an advertisement.
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