There are over 250 million cars on the road in the United States. That massive number makes the USA the world’s second-biggest car market on the planet next to China.
Given that China has over triple the population of the United States, it’s safe to say that American’s love their cars.
But do Americans love getting insurance as much as they love driving? Statistics tell us no. As many as 1 out of 8 drivers take to the road each day without insurance coverage.
There are a lot of reasons for that reality. Lack of funds, immigration concerns, lack of knowledge, and more.
To help bridge the gap on that last contributing factor, our team has put together this article outlining the different types of car insurance coverage that exist, what they cover, and which kinds you need to legally get behind the wheel.
Liability is the only kind of insurance coverage that is widely required by law. It is a base coverage that covers bodily injury and property damage of third parties affected in an accident you caused.
On the bodily injury front, your liability coverage will cover medical bills incurred as a result of accidents up to the amount of your coverage. As far as property damage is concerned, any damages caused to a vehicle during an accident would get paid for as well (again, up to the amount of your coverage).
It’s important to understand that liability is not among the types of car insurance that afford you any personal medical or property benefits. It only makes payouts to third parties and insulates you from lawsuits.
If you have a history of car accidents, your liability and other insurance coverage expenses can go up exponentially. Get more info on what your options are in those situations.
Collision coverage covers damages caused to your vehicle during an accident up to your coverage amount. For example, if you had a collision policy that was good for $30,000.00 and your car valued at $30,000.00 was totaled in an accident, you’d receive enough money to fully replace your vehicle.
Collision coverage is not required if you own a vehicle outright. It is required however if you’re financing your vehicle.
Personal injury protection protects you and your passengers from car accident related injuries. If you have a medical insurance policy, your PIP coverage may act as secondary coverage.
PIP is required by law in some states, even if you have medical insurance, to insulate drivers from lawsuits put into motion by their passengers.
Unless your lender requires it, comprehensive coverage is optional. With comprehensive coverage, your car will get protected from theft or non-car accident-related damages (damage caused during a flood for example).
Comprehensive coverage is often sold alongside collision coverage and consequently, may get referred to as “Comp & Collision” coverage.
In this article’s intro, we made mention of the fact that 1 out of every 8 drivers drove without insurance coverage. What happens if you’re hit by one of them?
Without liability insurance backing those drivers, you could be left covering the debt stemming from medical bills and damage to your vehicle.
To mitigate this risk, uninsured motorist coverage got added as a required type of car insurance in many states. With it, you can rest assured that no matter who hits you, you’ll get protected.
GAP insurance protects drivers from insurance payouts affected by depreciation.
When you drive your car off of a lot, it starts to go down in value. Just because its value goes down though doesn’t mean that the amount you owe on it goes down too.
For example, if you finance a car for $20,000 brand new, immediately its resale value might plummet to $18,000. If your car got totaled in an accident shortly thereafter, your insurer would only pay you the $18,000 your car was worth.
That puts you at a $2000.00 deficit with your lender.
With GAP insurance, any deficits caused via deprecation are given to you cash.
If your car is undergoing repairs after an accident, you may need a rental car to continue to go about your business. If your car is in the shop for weeks, rental costs can add up, fast.
With rental reimbursement coverage, you’ll have all rental related expenses reimbursed while your primary vehicle is undergoing repairs.
There are rules surrounding rental reimbursement policies that limit the amount your insurance will pay back “per diem” (on a daily basis). That could mean not being able to rent a car you’d like or one that can accommodate your unique needs.
Be sure to look over your rental reimbursement policy closely to make sure that the rental car you’ll be eligible for is useful.
There are so many different types of car insurance that it’s no wonder why people feel intimidated when shopping for policies.
As far as what insurance you need, you 100% need liability insurance. Beyond that, certain states may require personal injury protection and uninsured motorist protection.
Talk to your local insurance or DMV office to find out what your state’s requirements are and make sure you’re protected every time you get on the road.
On a final note, just because you have coverage doesn’t mean you’re fully covered. If the cost of an accident exceeds your policy amount, you’ll need to pay out of pocket any discrepancy.
That’s why it’s important to not only get insurance coverage but to get a high enough coverage amount to cover the value of your assets that could get seized in a lawsuit.
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