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Understanding The 6 Different Types of Auto Insurance

Driving behind the wheel of a vehicle is a major responsibility, but after so many years many drivers simply fall into the motions when they get in their vehicle. Unfortunately, this can sometimes lead to a lapse in judgment or a mistake on the road which leads to a car accident. When there is an accident that occurs in which no one person intentionally caused the wreck, it’s up to auto insurance to rectify the situation in most cases. 

However, few drivers are aware of the fact that there is actually more than one policy of auto insurance available. While basic auto insurance is required in nearly every state in the United States, there are other options to consider on top of this coverage. Learn about the different types of auto insurance so that you can ensure you are protected on the road. 

What Is Auto Insurance?

Regardless of whether you are a new or seasoned driver, refreshing oneself on the basics of auto insurance can be helpful. In short, car insurance is a policy which helps cover damages to a vehicle from specific and outlined situations, as well as covers the cost of injuries from an accident in some cases. A car insurance plan can be paid monthly, ever six months, or annually, in most cases, and so long as a policy is active the insurance is active as well. 

Auto Insurance vs. Warranty: Is There A Difference?

One of the biggest confusions people have in regard to car insurance is mixing it up with car warranty. Despite what many people think, these two policies are not one in the same. Auto insurance is designed to cover damages sustained by a vehicle during an accident of some sort, whether that be with another vehicle, object, or person. 

On the other hand, car warranty only covers repairs a vehicle requires which stem from pre-stated mechanical issues with a vehicle. A car warranty package, specifically an extended warranty from a third-party, can be paid for monthly as well which is why some people get confused.

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As an example, if a driver is involved in an accident with another driver on the road, car insurance would be the company a claim is filed with. However, if a person is driving and their vehicle sputters out on the road due to a breakdown, a car warranty claim would be filed. 

The 6 Common Types of Car Insurance

As mentioned earlier, there are a number of different types of car insurance depending on the vehicle a person has and the level of coverage they need. For perspective, commercial auto insurance in Mississippi is not the same as personal auto insurance in the state. Personal auto insurance, outlined above, has six distinct levels, arguable five depending on the state, for a driver to choose from: 

1. Auto Liability Coverage

This first form of auto insurance is also the one that is mandated around the country. Serving as the most basic form of auto insurance on the road, this type of insurance has two parts: bodily injury liability and property damage liability. The first helps pay for costs related to another person’s injuries if you cause an accident and are partially at faulty, whereas the second assists with paying for damages to their property. 

2. Comprehensive Coverage

Comprehensive coverage is a unique form of coverage in that it offers financial protection for events other than accidents. For example, things such as severe weather conditions, vandalism, theft, or other situations all fall under the umbrella of comprehensive coverage. 

3. Collision Coverage

Collision coverage is the form of insurance that kicks in when a person is involved in an accident with another vehicle or object. Unlike liability coverage, collision coverage helps pay for damages your vehicle sustained, and can even potentially pay to replace your vehicle up to its actual cash value minus the deductible. 

4. Underinsured or Uninsured Motorist Coverage

This specialty form of auto insurance solely exists to assist drivers who are in an accident with a person who either doesn’t have auto insurance or doesn’t have enough auto insurance to cover damages. With this insurance active, a person doesn’t need to worry about taking a person to court for damages, as it will assist in coverage for property damage or medical bills. 

5. Medical Payments Coverage

On the topic of medical bills, medical payments coverage insurance helps to pay for the cost of injuries sustained by yourself or passengers in your vehicle. Whether it’s x-rays, surgery costs, hospital trips, or something else, this insurance has you covered. 

6. PPI Coverage

Finally, only available in some states, personal injury protection (PIP) coverage helps cover the costs of your injuries but also goes further to cover costs such as lost income, childcare expenses, and more. 

At-Fault vs. No-Fault States: What You Need To Know

The majority of states in the U.S. operate using at-fault insurance policies. This means that when an accident occurs, the insurance companies investigate to determine who was at fault, and then, based on the level of fault, responsibility vs. insurance coverage is determined. 

There are some states that operate under a no-fault policy, however, where an investigation is not performed when a crash occurs. Rather, all drivers are required to have auto liability coverage and PIP coverage so that damages are taken care of right away if a wreck happens to occur. Research the laws in your state to determine which policy is followed where you are. 

The Bottom Line

Nobody wants to find themselves involved in a car accident that leaves them with tremendous injuries and a wrecked vehicle. While basic auto insurance is beneficial for rectifying some situations, it doesn’t cover everything.

After all, the last thing a person needs is to have their car vandalized only to realize that they don’t have comprehensive insurance, thus requiring them to pay thousands to fix the damages. Ensure you have adequate protection on the road every time you get behind your vehicle so that you can worry less and drive more. 

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