Many states require you to carry at least a minimum liability insurance. You can also purchase car insurance coverage like collision, comprehensive, and uninsured motorist coverage. Often, these additional policies are required by lenders if you lease or finance your vehicle. Whether or not they’re necessary depends on your driving profile and budget.
Collision auto insurance, which is the opposite of liability coverage, assists with replacing or repairing your car if it collides with an object, such as a tree or fence. It can also cover damage caused by driving your car into a ditch or rolling over. It is the only type of car insurance that protects your vehicle and its parts, not just the other person’s car or property. Collision coverage is not required by law, but if you lease or finance your vehicle, your lienholder may require it to protect their investment. The benefit of collision coverage depends on the value of your car and whether or not you are carrying a loan or lease on your vehicle. It also depends on the cost of the coverage, including your deductible and what is covered.
Additional optional coverages include medical payments (MedPay), personal injury protection (PIP), and uninsured/underinsured motorist coverage. While these are not necessary for every driver, they can be helpful. They are also usually available for an additional cost, and some can even lower your premium. Adding these coverage types can be a great way to customize your policy to fit your needs.
Liability coverage pays for other people’s injuries and property damage from an accident that you cause. It usually has a maximum limit specified on the policy (e.g., “50/100/25,” which means a maximum of $25,000 in property damage per accident and $50,000 in bodily injury coverage per person). It is the minimum car insurance required in most states. If your car collides with a tree, fence, or another vehicle, your collision coverage will pay for repairs. Some insurers also provide comprehensive coverage, which shields your car against non-collision events like theft, fire, storms, vandalism, or running over a deer. Both of these can raise the cost of a car insurance policy.
The coverage known as uninsured/underinsured motorist (UM/UIM) assists in covering medical bills, lost income, and additional expenses if a motorist hurts you without sufficient auto insurance. It’s optional in most states. Depending on your circumstances, consider adding other coverage types, such as roadside assistance, rental reimbursement, and new-car replacement insurance. You should also review your policy periodically to ensure your needs are met. For instance, if you have a new child or a job change, consider expanding your policy to add a rider for increased medical coverage.
Your car is shielded from harm by comprehensive coverage from events unrelated to a collision with another vehicle or object. This type of insurance typically pays for things like a tree falling on your car, theft, and vandalism. It also covers some environmental damage, such as a flood. Comprehensive car insurance is usually a supplement to your liability and collision policies. It is generally required if you are leasing or financing your vehicle and may be a good idea if you own an older car that has lost a significant amount of value. The maximum comprehensive payout is the actual cash value of your vehicle minus any deductible you choose, which can vary by insurance provider. Although a higher deductible will result in a lower premium, you may have to pay more out of pocket in the event of a claim.
It is important to note that comprehensive and collision insurance are not standalone and are usually included in a full coverage policy and other state-mandated insurance options. As a result, comprehensive and collision insurance often have higher rates than liability-only policies. Comprehensive and collision insurance might not be required or worthwhile if your car is in good working order and you can pay for repairs out of pocket. However, this personal decision is up to you and your financial situation.
Uninsured Motorist Coverage
When a driver causes an accident and either lacks auto insurance or has policy limits that are insufficient to pay for the damages incurred, you and your passengers are protected by uninsured motorist coverage (also known as “uninsured/underinsured property damage” or “UMPD”). It’s a common addition to car insurance policies and usually doesn’t cost much more than other types of coverage. The other option is to add underinsured motorist coverage, which helps pay for your damages and medical bills if an accident is caused by a driver who has some but not enough liability insurance. Again, it’s essential to have sufficient limits on your policy.
Think of the possibilities: You’re in a hit-and-run accident, or you get into a collision with someone who doesn’t have any or enough car insurance coverage to pay for the repairs and medical costs. These situations could be stressful, costly, and time-consuming to resolve. But with UM/UIM coverage, you may not have to deal with those extra headaches. It may even help pay to repair or replace your vehicle if an uninsured driver damages it. Uninsured or underinsured motorist coverage can also help pay for lost wages if you cannot work after an accident and other related expenses. Like collision and comprehensive coverages, uninsured/underinsured motorist property damage (UMPD) and uninsured/underinsured bodily injury (UMBI) are generally part of the same policy.