Everyone who drives a car knows how many threats are on the road. Even if you are very skilled driver it does not mean you and your car are safe, as you are not the only participant of the road traffic. Accidents, collisions, car’s damage and injuries – this is not a full list of unforeseen events you may face as a driver.
That is why car insurance is mandatory in almost all states in the US, so drivers often just opt for the cheapest policy, not knowing what things they sacrifice in terms of quality of Insurance and financial protection coverage.
It’s totally in your interests to know exactly what types of coverage you need primarily and is there a way to save your money still having a high quality of coverage. It’s fair for all types of insurance, like Health and Life Insurance and here is why https://www.finder.com.au/why-life-insurance-is-important.
Generally speaking, Car Insurance policies could be divided into two big categories:
The third party is the other driver, the participant of the road traffic whom you, as a driver, had a collision or an accident with. Hence, the Third-party liability insurance covers the possible harm you caused to the health of another driver of their passengers. This type of policy also covers the damage a policyholder caused to the property and a car of another driver.
The First party is a policyholder who is the driver, means you. He is a contractor of the Insurance Company, who is the second party and insures the risks and liabilities.
First party insurance covers the damage done to a policyholder and his property because of the car accident.
Indeed, the third-party liability insurance is mandatory in a majority of states, while the first-party policy is the matter of driver’s choice. Nevertheless, you are strongly advised to overcome the temptation to save some money by not buying the first-party insurance, as just a one single accident can put you in a position where you’ll have to spend all you savings to get back on track.
Types of Car Insurance coverage
1. Liability Insurance
Liability Insurance covers your liabilities which are resulted from the accident where your insured car is involved. In case it was officially determined that your fault or wrong actions have lead to the accident, your policy covers the damage to another car and medical bills of another driver of their passengers.
This type of Insurance is mandatory in almost every state but there is a certain minimum amount of liability coverage required. Obviously many prefer the least possible coverage just enough to match the required minimum. Still, you should remember that really good protection which is above the required minimum can not just come in handy, but one day can save you from the real financial disaster.
2. Collision Coverage
This type of Insurance is purposed to cover all expenses for car repairing in case it was damaged during the accident with another car or stationary object.
If you drive a new and pretty expensive car, the Collision Coverage is a really smart choice as you will not have to spend the fortune just to get your car back “in shape”.
Your premiums will pay off in spades when your car will need a serious and complex repair. On the other hand, if you own an old car, your may consider a collision coverage as not that helpful as your premiums may not be worth the cost of repair eventually.
If your insured car is damaged too hard so it’s not reasonable to repair it – the Insurer pays you the cost of the whole car.
Although the Collision Coverage is not mandatory according to the law, you still must buy it in case you have a lien holder of your car.
Read here the review on collision coverage benefits comparing to Comprehensive coverage https://www.valuepenguin.com/collision-comprehensive-car-insurance.
3. Comprehensive coverage
Living up to its name, Comprehensive coverage covers everything, including accidents non-related to the road traffic. This type of coverage is obviously way more expensive but if it fits your budget, you are recommended to buy it and get the full peace of mind.
It’ll cover you the cost of repair if the car was damaged by the weather, or if your car was stolen or vandalized, etc.
You can reduce the premiums for Comprehensive coverage by setting tracking of anti-theft devices. Same as Collision Coverage, the Comprehensive Coverage is required in case you have a lien holder.
4. Personal Injury Protection
First of all, the Personal Injury Protection is, unfortunately, available not in all states, but if it’s available at your location – you are recommended to purchase it. Whatever the accident and no matter whose fault lead to it, the Personal Injury Coverage pays all medical expenses for you and your passengers. Note, that in some serious cases medical bills can be critically high so here is when your Personal Injury Protection literally saves you.
5. Underinsured (or uninsured) motorist protection
This type of coverage usually comes as an addition to the Liability Coverage and will add to the general policy’s cost not much. Still, the value of Underinsured motorist protection is underestimated by many.
The thing is, if the other driver who caused an accident does not have the Liability Coverage insurance – you will not get paid for your car damage or medical bills. Same, if the other driver does have the Liability Coverage but the amount of coverage is not enough to cover your whole loss – you will have to pay the rest from the own pocket.
An Uninsured motorist protection covers those risks fully (for some additional premiums of course).
Rental Car Insurance
The question is – should you buy a car insurance when it comes not to your own but a rental car?
Here is the explanation of few key moments about the Rental Car Insurance, its benefits, and pitfalls http://money.usnews.com/money/personal-finance/articles/2012/06/04/should-you-purchase-rental-car-insurance.
Whenever you decide to hit the road and go to vacation by rental car you have to consider buying the special Rental Car Insurance as your protection from dozens of possible risks associated with unforeseen accidents.
Your rental Car Insurance is supposed to cover the following:
- Car’s damage caused by the collision due to your or other driver’s fault;
- Car’s theft and acts of vandalism;
- Body injuries and medical bills related to the traumas (including you injuries and other driver’s and their passengers).
In short, your Rental Car Insurance does almost the same as a regular full Car Insurance policy, but it costs way less, about 20-40$, depending on the type of policy and list of perils covered.