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Types of car insurance and what each type covers

There is an assortment of car insurance policies, and depending on where you live, you may be required to carry a specific type of insurance to drive. Typically, these individual insurance policies are part of a larger insurance package for which you pay a premium. Sometimes, if you insure more than one asset (for example, your car and your house), you may receive discounts on your insurance premiums.

What is car insurance?

Car insurance is an agreement between you and an insurance company in which they promise to cover your financial losses if you get into an accident, or something happens to your vehicle or property in it.

Types of Insurance

Each type of insurance serves a different purpose. Certain types of insurance policies are government-required, and others are optional. If you finance your vehicle, your financial institution may also require you to purchase more insurance than what your state requires.

Liability insurance

Every state requires that a driver carry bodily injury liability or liability insurance, at the very least. This type of insurance pays for any injuries caused to other drivers, their passengers and people walking or standing on the street if you are at fault for a car accident. This insurance will also pay your legal fees if necessary.

Another required type of insurance for all drivers in every state is property damage liability insurance. This type of insurance covers the damage you could cause to other people’s property if you are at fault in an accident.

Uninsured motorist bodily injury and property damage

This type of insurance covers your passengers’ expenses if the other driver is at fault, uninsured, or underinsured. Similarly, uninsured motorist property damage insurance covers costs related to damage to your vehicle if an uninsured driver hits you.

Usually required if you finance your vehicle

Collision insurance covers damage to your car, partial or total, due to an accident. Comprehensive insurance covers your vehicle if damaged by other specific events listed in the contract (vandalism, weather, or other specified circumstances.)

Not required everywhere

You must carry medical coverage in certain specific states, and it is optional in others. Medical insurance pays for your medical expenses and those of your passengers, regardless of who is at fault. The same is the case with personal injury coverage, which pays for costs related to the accident regardless of who is at fault.

Thinking about being in a car accident is the last thing anyone wants to think about, but it is essential because accidents do happen, and they happen often.

More information

When it comes to protecting yourself and your money, it is much better to evaluate your car insurance policy before you need it. If you have questions about how much insurance you should have, contact an attorney knowledgeable in auto insurance matters.