Car Insurance Coverage Options

Every auto insurance policy consists of a number of individual coverage options. Each of these options offers a different type of protection and contributes a specific amount to the policyholder’s total annual deductible. The types of coverages included in your policy as well as the limits of those coverages are left to your discretion as a policyholder. Below, we’ve outlined the various types of individual coverages to help you customize your car insurance policy accordingly.

Property Damage and Bodily Injury Liability

Liability protection will pay for the property damage and bodily injury you cause other parties in an at-fault collision. Liability auto insurance is required in almost all states, although the minimum limits for this coverage vary widely. These limits are broken down into three categories: bodily injury liability for one person in a collision, bodily injury liability for all persons injured in a collision, and property damage liability for a collision. For example, the car insurance liability limits in Alaska are 50/100/25.

Physical Damage Coverage

Physical damage coverage includes collision and comprehensive coverage, which are typically part of a full coverage car insurance . Unlike liability protection, collision and comprehensive protect your vehicle in a covered loss rather than those of the other involved parties. If your car is damaged in a covered collision, physical damage protection will pay for you to replace or repair the vehicle. Your insurance company will only provide you with a benefit up to the actual cash value of your vehicle less your deductible. For instance, if your car were totaled and had an actual cash value of $12,000 with a $500 deductible, your carrier would provide you with $11,500 to replace the vehicle.

Selecting the Right Deductible for You

Your deductible is the portion of a comprehensive or collision claim that you must pay out of pocket. An important step in creating the physical damage portion of your car insurance policy is determining the right deductible for your budget. A good rule of thumb to keep in mind is that higher deductibles result in higher premiums. Of course, lower deductibles are much more manageable financially in the event of an accident. For the average policyholder, experts recommend setting the deductible as high as is financially feasible on your monthly budget.

Medical Payments Coverage

In most states, medical payments coverage is not mandated by law, much like uninsured driver coverage and underinsured driver coverage. However, most policies include medical payments coverage in order to supplement health insurance coverage or to pay medical expenses if the policyholder does not have health insurance. Regardless of fault, medical payments coverage will cover medically necessary treatments and tests, such as hospital stays, diagnostic tests, and physician visits. Some states may offer personal injury protection (PIP) instead of or in addition to medical payments coverage. The limits of your medical payments coverage are up to you, unless of course there are minimums set by the laws of your state.

Gap Coverage

Gap coverage, also known as loan/lease payoff coverage, is a specialty type of auto insurance intended to protect drivers who lease their vehicles or are upside down in their car loans. When you owe more on your vehicle than it is worth, your auto insurer will only reimburse you for what the vehicle is worth, leaving you financially responsible for the difference. Gap coverage will pay you for this difference in the event of a covered loss on a vehicle with an upside-down loan.

Rental Car Reimbursement

Carriers typically offer rental car reimbursement coverage, or loss of use coverage as an option. If your vehicle is damaged or totaled after a covered loss, your carrier will reimburse you for a rental car for a limited amount of time while your vehicle is replaced or repaired. Most carriers set daily limits on the amount they will reimburse you for the rental vehicle. For instance, your rental car reimbursement coverage might specify a limit of $30 per day for 30 days.

Roadside Assistance

If roadside assistance service does not come with your vehicle or with your membership to an auto club, you might consider adding roadside assistance coverage to your policy. Roadside assistance coverage is an optional, inexpensive coverage, such as glass coverage, that you can add to your policy without raising your car insurance premiums significantly. The services provided by the coverage vary from carrier to carrier but typically include tow coverage, flat-tire assistance, lock-out assistance, and so on.