When shopping for auto insurance there are two primary aspects to coverage on an auto insurance policy, liability and comprehensive coverage. Liability insurance is required by law in most states in order to operate a vehicle or get your drivers license. This basically shows that you have insurance in the event you cause someone else harm or damage. Comprehensive coverage is usually for all things that don't involve a collision. This could include broken glass or dents from hail storm and theft from your vehicle.
In this article we discuss the different types of coverage options available on most auto insurance policies to help you make a more informed decision.
Standard auto insurance policies offer similar options and required limits. Depending on the state you live in the liability insurance limits will vary. Some states may require medical payments coverage in addition to bodily injury coverage but it is rarely recommended to carry just state minimum liability limits. Since each state can require different liability insurance limits we will explain the coverage in general.
Each auto insurance policy will need to meet the state liability limits for bodily injury and property damage. It may also be required to carry other coverage such as medical payments or personal injury protection (PIP) in certain states.
What is auto liability insurance?
Liability insurance protects the insured from financial loss due to bodily injury or property damage caused by the insured. Most auto insurance policies are broken down into three parts: Bodily Injury per person, Bodily Injury per accident and Property Damage. There is a dollar amount allocated to each coverage which is often depicted as $100k/$300k/$50k.
Full Coverage - This term gets thrown around often but few people know what it truly means. The word "full" would have you believe it covers everything but in fact no insurance company offers a package called "full coverage" for that reason alone. If you want to provide protection for your vehicle in the event of an accident or other covered loss you will need full coverage. The term "full coverage" refers to the addition of comprehensive and collision protection:
Comprehensive Protection - A good rule of thumb is to think of everything besides running into something is considered comprehensive. This includes theft, vandalism, hail and wind damage.
Collision Protection - This is obviously the direct damage caused from a collision. It does not have to involve another vehicle rather it is any object that is hit during operation of the vehicle. In most cases this involves hitting another car but it can also include hitting a street sign, pedestrian or other object.
Medical Payments Coverage - Often a coverage required by law in many states this coverage can be waived in most cases. While it is optional it is a good coverage to help pay medical expenses no matter who is at fault. This covers any person in the covered vehicle at the time of accident.
Uninsured Motorist - Also referred to as underinsured motorist coverage this protects the insured from other drivers who don't have any insurance or not enough to cover the damages caused by them. This is often the case when a hit and run accident has occurred and the at fault party cannot be found.
Glass Coverage - A few auto insurance companies offer a separate coverage directly relating to the glass in the vehicle. This would usually cover a broken windshield, door window or rear glass in the event of a covered loss. In many cases there is a very low deductible of $100 which can replace any glass in the vehicle. Some expensive cars can have windshields that cost over $1000 to replace which makes this coverage very handy.
Towing & Roadside Assistance - A cheap coverage to add but very important and often overlooked. This type of coverage can cost as little as $20-50 per year but offer a priceless protection. If you need roadside assistance to change a tire, jump start and any other issue the company will dispatch a tow truck for you. It also can include towing which often costs over $100 just to get your car to the nearest repair shop.
Gap Coverage - Often when you purchase a car it loses enough value in the first few months that the loan you have on it can actually be valued higher than the car. This is referred to as a "gap" in value between the car and the loan that is tied to it. Gap coverage will pay the difference between market value of the car and the current loan amount after a total loss. If you put money down on a car loan or have purchased a used vehicle this is less needed.