When you are buying car insurance, it can be confusing to understand the different types and how they apply. In order to make the best purchasing decision, it is important to look for more than just the lowest premium rate possible and buy exactly the kind of insurance you need.
Liability car insurance is required in almost every state in order to drive legally and register your car. Liability insurance protects you if you cause an accident by paying for damages to the other person’s car and for injuries they or their passengers may receive as a result of the accident. Liability insurance does not pay for repairs to your car or for injuries you or your passengers receive.
The minimum of liability insurance usually does not provide enough coverage for the average accident, so it is a good idea to purchase higher amounts of this kind of auto insurance if you can afford it. Without enough insurance, you are still legally responsible for the expenses associated with an accident you cause. If you do not have insurance or you do not have enough coverage, you may be sued for damages, leaving your home and other assets potentially at risk.
Collision auto insurance provides protection for your vehicle if you are involved in an accident. This type of car insurance pays for repairs to your car if you cause an accident. If your car is financed or lease, you will probably be required to carry collision insurance by your lender. Collision insurance is not legally required.
Comprehensive auto insurance provides coverage for events unrelated to having an accident. For example if you hit an animal or your car is damaged because a tree limb falls on it, then it would be covered under your comprehensive policy. Other things covered by comprehensive insurance include damage that occurs due to fires or floods, vandalism and if your car is stolen. Most lenders require comprehensive insurance if your car is leased or financed.
Personal Injury Protection
Personal injury protection, or PIP, insurance is required in several states as supplemental auto insurance. PIP is also sometimes referred to as “no fault” insurance because it is applied regardless of who causes the accident. PIP is used for medical expenses, including hospital and doctor fees. Additionally, it can be applied to lost wages, legal expenses and rehabilitation services.
Gap insurance is important if your car is financed or leased but it is not required by lenders. If your car is damaged and declared a total loss, the loss amount that is paid to your lender is the value of the car at the time of the accident. This amount is almost always substantially lower than the amount of money you owe on your car loan or lease amount. Unfortunately, even if your car is totaled, you are still responsible for the entire amount of the loan or lease. Gap insurance pays the difference between the loss amount and the balance of the lease or loan.
Once you know what kind of car insurance will best meet your needs, you can then begin to shop for the lowest rates possible from the best insurance companies you can find. Armed with this knowledge, you can make good buying choices to help you with all of your auto insurance needs.