Basic Types of Car Insurance

There are many different types of car insurance policies, and even within the basic types, there are a ton of different “add-on” services that you can purchase.  Here is a quick overview of the three basic types of car insurance and what they cover for you and your vehicle.

Liability Insurance

Liability insurance is the most basic form of car insurance you can buy.  All it covers is your liability for an accident – meaning that if you are at fault in an accident and injure of cause damage to someone else, it will help cover your costs of repairing their property and paying their medical bills.

Liability insurance is typically mandated by most states and countries as a pre-requisite to driving a motor vehicle.

Collision Insurance

Collision car insurance is the next step up from liability insurance.  Not only will it pay for your liability in regards to someone else, it will also pay for repairs to your vehicle in the event of an accident.

If your car is totaled in an accident, then the collision insurance will pay out the current value of your car.

Comprehensive Insurance

Comprehensive insurance is also known as full coverage car insurance.  This is the insurance that covers basically everything that could happen to you and your motor vehicle.  Comprehensive insurance includes everything from the basic liability insurance and collision insurance policies, but it includes even more “add-ons” to make sure that you are protected.

For example, most comprehensive insurance policies cover you if your vehicle is stolen.  It will pay the replacement cost of the car.  It also usually covers you from damage not related to a collision, such as storms or floods (for example, if a tree fell on your car).

Comprehensive coverage usually also includes uninsured motorist protection.  This means if you are hit by an uninsured motorist, your insurance will still cover you even though the other party is at fault and should be paying the cost.

It is important to remember that comprehensive insurance is the most expensive option, and isn’t necessarily recommended if the value of the car is minimal.


Comments

Basic Types of Car Insurance — 1 Comment

  1. I work in the insurance industry and the article contains mostly useful information. But there are other things that insurance companies don’t necessarily disclose and you find out too late.
    For instance one of the major budget insurance companies will refuse to renew your policy if you have an accident in your first year with them. This can cause heartache if your no claim discount is not yet protected with another company because you then have to start from a lower discount with your new company. I have never heard of a customer who had been warned that this refusal to renew might happen. It’s just false economy to use discount car insurers in my (admittedly biased) opinion.

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