Comprehensive Insurance Coverage
If you are looking for automobile insurance, you may be surprised to learn that there are several different types of car insurance coverage available. Not all types of coverage are available in all states, but the six basic types are:
- Liability Insurance
- Uninsured motorist coverage
- Comprehensive coverage
- Collision coverage
- Medical payments coverage
- Personal injury protection.
Some of these types of insurance are mandatory under state laws, while others are not required. In addition, if you have an auto loan or have a lease agreement for your vehicle, that agreement may require you to maintain at least a certain level of coverage.
Understanding the difference between them can help you make the best decision for your insurance coverage.
Most states require you to have auto liability coverage, which pays for the other person’s property damage and bodily injury if you are in an accident. Uninsured/underinsured motorist coverage pays for medical bills and sometimes property damage if you are in an accident with a person who either lacks insurance or does not have enough insurance to cover your claim; it is mandatory in some states, but not others.
Comprehensive coverage pays for damage to your vehicle if you suffer some other type of event, like auto theft, and it generally comes with a deductible. Collision coverage pays for damages to your vehicle if you are at-fault in an accident or if you are in an accident with a person who does not have insurance and uninsured motorist does not apply. Medical payments coverage pays for medical bills for you and the passengers in your vehicle. Personal injury protection may help you recover from medical bills and related expenses if you are in an accident but is not available in all states.
Generally, if you are “fully insured” it means that you have both comprehensive and collision policies, which are sometimes both lumped under the comprehensive label. It means that the actual current value of your vehicle is covered, minus the amount of your deductible, in the event that something happens to your vehicle. However, it is important to understand the actual current value of your vehicle, which may be lower than any amount you have remaining on auto loans, depending on the age of your car. An additional product, commonly known as gap insurance, pays for the difference between the outstanding balance due on the car and the actual value on the car if a vehicle is totaled and you owe more than it is worth.