Buying a car is no longer a luxury. It has become a necessity for comfortable living. When it comes to buying a car, one needs to consider multiple factors like manufacturer, safety features, fuel mileage, interiors, etc while buying a car. The same amount of research needs to be put in while choosing car insurance as well. With various types of auto insurance available in the market, it can be confusing at times to select the right one for you.
If you are feeling a little overwhelmed and need help in deciding the perfect car insurance for you, you have come to the right place. Before you start comparing car insurance quotes online, you need to understand the different types of insurance cover. We’ve listed 7 major types of car insurance below, each accompanied by notes on what they cover and who needs them. Let’s get started:
1. Liability Coverage: This is the most basic form of auto insurance coverage that has been made mandatory by law. If you are at fault for an accident, then under liability coverage, your insurance provider will pay for the physical injuries and property damage of the other parties involved in the accident.
Who Needs It: Anyone who owns a car and wants to drive it needs liability insurance coverage.
2. Collision Coverage: Unlike liability coverage that pays for others’ post-accident expenses, collision coverage offers protection to your vehicle. It involves coverage for collision with an object such as a tree, car, or a building as well as non-collision related accidents such as flipping off the car.
Who Needs It: Though it is recommended for new drivers who are prone to accidents, it is not necessary to opt for collision coverage unless your auto loan provider insists on getting one.
3. Comprehensive Coverage: This type of insurance covers any non-accident related losses such as theft, falling objects, natural disasters, etc. It provides protection even when the driver has been negligent.
Who Needs It: People who buy collision coverage prefer to opt for comprehensive insurance as well, as it provides overall protection to the vehicle. If you park your car on the street or in a public parking space, it is advisable to choose comprehensive coverage. Again, this type of insurance cover is not mandatory unless your financier insists.
4. Guaranteed Auto Protection: It’s time to ring the crisis bells when your car gets totaled or gets damaged irrevocably. Under such circumstances, your insurance provider only pays for the depreciated value of your car which may not be enough to cover the balance payment on the auto loan. Under such circumstances, guaranteed auto protection(GAP) covers the difference between the outstanding loan amount and the depreciated value of your car.
Who Needs It: People who opt for a high term period to repay the auto loan might want to consider GAP coverage.
5. No-Fault Insurance: It involves the insurance company paying for medical bills and repair costs for you and your car, irrespective of who was at fault for the accident. If both the drivers involved in an accident are covered by no-fault insurance, then their respective insurance companies will pay for injuries and property damage incurred by each driver. It helps in claims getting settled faster instead of insurance companies fighting each other to determine who was at fault.
Who Needs It: Consider choosing no-fault insurance if you are prone to careless driving or if you wish to speed up the claim settlement process in case of an accident.
6. Emergency Roadside Assistance: As the name suggests, this insurance coverage provides emergency assistance to drivers who are stranded on the road due to car breakdown. It covers a range of things from hiring a mechanic to paying for a tow truck.
Who Needs It: If you are the traveler kind who hits the highway often or drives across cities, then this insurance would help if you are stuck with a broken car in the middle of nowhere.
7. Under-insured Motorist Coverage: There might be instances when you are involved in an accident caused by an uninsured or an under-insured driver. In such cases, their insurance company might not cover for your loss. Thus, it is recommended to get an under-insured motorist coverage that will pay for your damages when the driver at-fault has little or no insurance.
Who Needs It: If you are the over-cautious type who likes to be prepared for all situations, then this one’s for you.
Before you go around shopping for the optimum car insurance for you, familiarize yourself with general insurance terms such as deductibles, claims, premiums, rental reimbursements, MedPay, etc. Happy shopping!