Auto Insurance – Different Types of Coverage


Purchasing a new car is a very exciting process. Along with all those additional paperwork and procedures, one important thing that is mandatory with the purchase of new car is auto insurance. Auto insurance is an agreement between you and your insurance company that covers you and your vehicle at the time of accidents. There are several policies and insurance companies. There are many types of coverage that these insurance companies offer. Determine what coverage works best for you and what coverage is mandatory in the state you live, before making your choice.

Liability Insurance

This kind of insurance is the most common of all and is mandatory in almost all states. In liability insurance coverage, the insurance company pays for all your liabilities to the other party involved in accident with you. If there are damages to the vehicle of the other party, then you are liable for the repair costs. Your insurance company will pay the liability to the other party’s insurance company. In most of the states, you are required to have at least liability insurance, if not any other kind. In some states however, they do not require mandatory liability insurance, but you are supposed to have financial assets to be able to pay off the liability. Liability insurance also covers all the property damages like lamp posts, gates, telephone poles and so on, occurring by accidents caused by you or another driver using your car,

Medical Liability

This insurance covers any expense incurred in treating injury or other medical conditions caused by the accident. If the designated driver of the car or any other people in the car has some injury due to an accident with your car, then you are liable for the medical expenses in treating them. In this insurance coverage, your insurance company pays all the liability incurred in medical treatment. It also covers treatments you or your family member goes through when your car is involved in an accident.

Collision insurance

In case of liability insurance, it covers the damages cause to the other party’s car. But in case of collision insurance, it covers damages caused to your car too, even if you are at fault. Expenses incurred in repairing the damaged car will be paid by your insurance company.

Comprehensive coverage

This insurance coverage protects your car from any natural disaster like hurricanes, earthquakes or damages occurred by rain wind or hailstorm. In case of car theft, this coverage reimburses the loss of property. It also includes coverage from damage caused in case of riots and sabotage.

Uninsured motorist

If any damage is inflicted upon your car by another car driver who is not insured, then you cannot collect the damage expenses from the other driver. Uninsured motorist insurance covers you in such situations. The insurance company pays all damages to your car even though it cannot recover the costs from insurance company of the other driver involved.

All these insurance coverage requires you to pay a certain amount of premium either annually or monthly. Every type of coverage has different premium rates in different insurance companies. Apart from the premium rate, there is something called as a deductible, that you will have to pay, like a down payment before you file a claim. This deductible is non-reimbursable amount in most of the cases except collision coverage, if you are not at fault. Your premium amount depends partly on the deductible amount you choose.