Types of Auto Insurance Policies

Generally, auto insurance policies tend to fall into one of two categories: full-coverage and liability-only. Within these two categories are several more types of car insurance that insurers offer to meet the diverse needs of their customers. A plethora of factors can influence the type of car insurance policy that is right for you, including your budget, state laws, and the value of your vehicle. Read on for a brief explanation of the various types of auto insurance policies available to you.

Liability Auto Insurance

Liability car insurance pays for the damage you do to other drivers’ vehicles as well as any injuries you cause those other drivers. Typically comprised of two parts, a liability policy will have a bodily injury liability and property damage liability component. The policyholder sets the limits of the liability coverage according to the worth of his/her assets. The policyholder’s vehicle is not protected by a liability-only auto policy.

A liability-only policy is typically what drivers purchase when they have vehicles with little or no cash value, are on a tight budget, want just enough coverage to comply with state law, or have enough money to repair or replace their vehicles out of pocket in the event of a collision.

Full Coverage

Full coverage car insurance policies usually offer liability protection in addition to collision and comprehensive coverage, also known as physical damage coverage. Simply put, this type of auto policy covers your vehicle as well as those of other drivers in an at-fault accident. Typically, insurance specialists recommend full coverage for policyholders who have valuable or new vehicles. The physical damage portion of full coverage will pay to replace or repair the vehicle in the event of a collision or another covered loss, such as theft. Full coverage is far more expensive than liability-only policies in most cases.

The typical full coverage auto insurance policy includes several other protections in addition to liability and physical damage, such as medical payments coverage, roadside assistance, rental car insurance reimbursement, and more. These peripheral protections are rarely mandated by state law, but most insurance agents recommend them for the sake of convenience and long-term cost savings. For example, the optional rental reimbursement coverage will help you pay for temporary, alternative transportation if your car is disabled after a covered loss.