Learn More About the Different Vehicle Coverage Types

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 protection included in your policy as well as the limits of those provisions are primarily left to your discretion as a policyholder. Below, we've outlined the various types of individual options to help you customize your car policy accordingly. You will also find helpful answers to common questions like how to insure a salvage-title vehicle and whether auto policies extend to pets traveling as passengers.

Liability Coverage: 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 protection 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 liability limits in Alaska are 50/100/25.

An important point to understand about your auto liability protection is that it does not compensate damage done to you or your car in an accident—that is the responsibility of the other party's liability coverage. Furthermore, liability does not cover property theft from your vehicle. In fact, your policy in general will not compensate theft of the contents of your car unless your carrier offers and you purchased vehicle contents protection. That means that if your laptop is stolen from the backseat of your car, you would have to seek reimbursement from your home or renter's policy, not your car insurance.

Physical Damage: Collision and Comprehensive

The physical damage option includes collision and comprehensive add-ons, which are typically part of a complete plan. Unlike liability protection, collision and comprehensive protect your vehicle in a covered loss rather than those of the other involved parties. With the comprehensive option, commonly covered incidents include theft, fire, vandalism, broken windshields or windows, animal damage, falling objects, weather damage, and water damage.

If your car is damaged in a covered collision, physical damage protection will pay for you to replace or repair the vehicle. Your insurer 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.

Who Needs Physical Damage Protection

If you have a car that has a decent cash value, you should opt for this protection. The benefits for these types of claims are determined by the actual cash value of the vehicle. For example, if your car were stolen, your insurer would calculate its actual cash value (its original value less depreciation) to determine your settlement. As long as your vehicle has some cash value, physical damage protection is well-worth the extra premiums, particularly for drivers who have expensive and/or newer cars.

On the other hand, you might be able to forgo physical damage insurance if your vehicle has little or no cash value. In that case, this provision could end up costing more than it's worth. For instance, if your automobile has an actual cash value of $1,000, carrying comprehensive and collision coverage would probably not make much sense. Assuming a $500 deductible, if you make a claim on your collision or comprehensive, you would only receive a benefit of $500. The premiums you paid over the course of the year would probably exceed that benefit. If you have a vehicle with minimal cash value, your best bet is to drop collision and comprehensive and save the money you would've spent on the extra premiums. This way, if your vehicle is damaged, you can afford to repair or replace it out of pocket.

Uninsured/Underinsured Motorist

Depending where you live, you may or may not be required to purchase uninsured motorist protection as part of your policy. But even if you don't live in a state that requires this protection, you should seriously consider it. Although it is an extra annual expense, uninsured driver coverage can insulate you from catastrophic expenses if you're ever in a serious accident with an uninsured or underinsured driver. You might comply with the laws of your state, but not all motorists are as conscientious and law-abiding. Below, we've enumerated a few of the reasons why you should consider purchasing this added peace of mind:

  • You have zero financial insulation from the damages and injuries that result from an accident with an uninsured or underinsured driver if you fail to purchase this add-on.
  • Remember that if you have an accident with an inadequately insured driver and decide to settle the matter privately, you will not be able to rely on your policy in the event the other driver doesn't come through.
  • Relative to the potential costs you might incur without it, uninsured/underinsured driver protection is very affordable. These add-ons generally extends beyond repairs and medical expenses to things like lost wages and sometimes pain and suffering as well.
  • Your carrier might offer you two separate options: uninsured driver bodily injury and uninsured driver property damage. The latter provision may be unavailable in some states, however. Consider these two options when requesting quotes to see if bundling them into one package would be the cheapest option.
  • Medical Payments or Personal Injury Protection (PIP)

    In most states, the medical payments option is not mandated by law, much like uninsured/underinsured driver options. However, most policies include medical payments protection in order to supplement health insurance or to pay medical expenses if the policyholder does not have a health plan. Regardless of fault, medical payments protection will compensate 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. The limits of your medical payments are up to you, unless of course there are minimums set by the laws of your state.

    Filling the Gap

    Gap auto coverage, also known as loan/lease payoff protection, 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 car 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 insurance will pay you for this difference in the event of a covered loss on a vehicle with an upside-down loan. Your lender or lessor might require you to purchase this protection.

    Rental Car Reimbursement

    Carriers typically offer rental car reimbursement add-ons, or "loss of use" as an option. If your vehicle is damaged or totaled after an applicable 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 plan might specify a limit of $30 per day for 30 days.

    Roadside Assistance

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

    Full Coverage vs. a Liability Only Policy

    One of the most important decisions you'll have to make when weighing your options is whether you want a liability-only or full-coverage policy. Which is right for you will depend on your vehicle, your finances, and your comfort level with risk. When carriers refer to a standard car policy, they typically mean full coverage. This type of policy commonly includes liability, collision and comprehensive, and add-ons like rental reimbursement and roadside assistance. Strictly speaking, though, you carry full protection as long as you have both liability and physical damage options. Conversely, a liability-only policy will only pay for the damage and injuries you cause to other parties. This means you will be solely financially responsible for any damages or injuries your vehicle, you, or your passengers suffer in an at-fault accident.

    While full coverage is the safest and least risky option, it is not financially feasible for every driver. You might not be able to fit it into your budget, or you might simply not need, legally or financially, to carry protection on your own vehicle. Your vehicle might not be worth enough to justify the cost or you might be financially secure enough to take the risk of having to pay out of pocket in the event of an accident. Consider your premiums, your vehicle, and your openness to risk when deciding between full and liability-only options.

    Miscellaneous Questions and Concerns

    In the following list, you'll find brief overviews of a few miscellaneous topics that often come up when discussing protection issues.

    • Insuring a car with a salvage title. A salvage title means that some incident occurred in a car's history that was substantial enough for the state to declare it a loss of some kind. Most often, the incident was a serious accident. Whether you can get full coverage for a automobile with a salvage title will depend on the regulations of your state, your carrier, and the value of the vehicle. The protection you will likely have the most trouble getting is comprehensive because the vehicle might not be worth enough to warrant it. Collision coverage might pose similar problems if the vehicle's cash value is minimal. Otherwise, a salvage title car should qualify for liability, uninsured/underinsured driver, and medical payments protection. However, because carriers are likely to see such a car as a higher risk on the road, your premiums might be inflated.
    • How Pets Come Into Play. You may have wondered whether your policy would include your pets in the event of an accident. In some cases, the other party's property damage liability will take care of your passenger pet but only in accidents for which you were not at fault. If you travel frequently with your pet and would like a more peace of mind, some carriers offer auto policies with pet insurance under the comprehensive portion of the policy. With such provisions, your policy would insure your pet(s) in the event of an accident regardless of fault.
    • Accidents that take place while fleeing from law enforcement officers. In the event of a high-speed police chase, would the auto insurance of the driver fleeing police cover the ensuing damage and/or injuries? For these losses to be covered, four requirements must be satisfied:
      1. The driver must be in his/her own vehicle.
      2. The driver must carry sufficient liability protection.
      3. The policy of the driver must not contain an exclusion waiving coverage for losses resulting from a police pursuit.
      4. The damages must be the direct result of the fleeing driver's negligence.
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