Basic Types Of Auto Insurance Coverage

Understanding the type of coverage available in your auto insurance policy will help you to understand what to do'after a car accident. The main parts of your car insurance policy are:

Comprehensive and collision insurance coverage
Liability coverage
Medical payments (in some states this is called PIP- Personal injury protection)
Standard Types of Auto Insurance Coverage in Every Policy
Before purchasing an auto insurance policy, you will be asked to identify how much coverage you want across the main types. Your choices will influence how much your premium payments are, so you need to understand what each type of coverage offers you:

Comprehensive coverage covers anything that is not collision related. Fires, theft, windshield breakage, hitting an animal (such as a deer) are all examples of items that would be covered under this type of coverage.
Collision coverage on the other hand, gives you coverage if you collide with something, such as another car.

TIP: Both comprehensive and collision coverage section of the policy usually require you to select a deductible paymentamount that you will need to pay should anything happen to your car.

Liability section of your auto insurance pays for the cost of anything that you are liable for as a result of causing the accident. This could be the damage to another person's vehicle, fence, or the bodily injury (medical payments) of another individual. KEEP IN MIND: Your liability section does have limits which will determine the highest amount your insurance company will pay in the event of an accident. Most states have set state minimums - meaning you can't buy limits below this amount. Check your policy for these limits.
Medical payments (or PIP as it is called in some states) pay for injury or medical payments incurred in your auto accident. This is not a medical policy, but is very basic coverage for you and your passenger should any injury incur while in your vehicle. In some states, this coverage will pay medical expenses regardless of fault, so check with your insurance company regarding the particular of your state.
Commercial Auto Coverage

If you are conducting a business of any kind with your auto (driver for hire, transporting, using your vehicle say in a catering business or sales) you may consider commercial auto insurance. Commercial Auto Insurance or a Business Auto Policy is usually written with higher limits due to the higher risk. Make sure you explain fully the business you are conducting and all the information concerning how your automobile will be used in this business. This allows your insurance company to underwrite the risk properly which will give you the best coverage possible for your business.

Many insurers now provide free commercial auto liability quotes on-line or provide information for the nearest agent when pricing policies for large business or complicated scenarios where on-line quotes don't work well.
Gap Insurance


You should also consider Gap Insurance, particularly if you are leasing or financing your car. Gap Insurance covers you in the event you find yourself upside down on a vehicle loan. If your car is considered a total loss in an accident, the insurance company will pay you the actually cash value (ACV) of the vehicle.If this amount is less than your loan payoff, then you will still owe money for the car, even though it has been destroyed in an accident. Gap insurance solves this problem by paying the difference between what you owe and what the car is worth. Before you purchase a car insurance policy, ask your carrier about this coverage. It could save you from making a payment on a car you no longer can drive.

Umbrella Coverage

If you have high assets or at a point in life where you're making a very good income, you may consider purchasing an umbrella policy or a personal liability policy. A bad accident could exhaust your liability limit on your auto policy. At this point, you are on the hook for anything that your insurance company refuses to pay. Usually purchased with a minimum limit of a million dollars, this policy increases the limits by a million dollars above your present auto liability limits. In the unfortunate event of a bad accident where you exhaust your limits under your liability coverage, your umbrella policy will then kick in, paying above those underlying auto limits up to one million dollars.

TIP: For as little as sometimes $200, this policy can give you the extra million dollars in coverage that you could be liable for in a bad accident. In addition to providing extended liability coverage, umbrella policies also add additional types of coverage such as libel or slander.

How much auto insurance coverage you need is up to you, so take some time to evaluate your coverage needs before finalizing your auto insurance policy.