8 Auto Insurance Coverage Policies You May Need

You are familiar with the generic term "car insurance." However, what exactly are all those coverage options listed in your policy? Before you purchase car insurance, it is best that you know what you are buying and what type of insurance coverage you really need.

An auto insurance policy contains many coverage options that protect your car in case of damages, or protects you from a lawsuit. Each option affects the total premium you will pay for the insurance coverage. Some types of car insurance coverage may be required by state law, such as liability. Also, if you are financing an auto through a bank or finance company, the lien holder will most likely require you to purchase a full range of car insurance coverage options.

Below is a typical list of car insurance coverage options you may find in your policy.

Types of Coverage

• Liability - Mandated by law in most of the states, liability coverage ensures that you can pay for the damage and injury you cause to others in an accident. In addition, your insurance company will pay for any court and attorney fees should you need to go to trial. It is important to check with your state to ascertain what the minimum liability coverage is.
• Collision - If you are in an accident, collision coverage will pay for the repairs to your damaged automobile.
• Comprehensive - With comprehensive coverage, your car is protected against non-accident damage, including flood, theft, vandalism, or hail.
• Medical - With medical coverage, your insurance policy will pay for the medical expenses, whether you or the other party was at fault.
• Personal Injury - Should you become injured in an accident, personal injury protection (PIP) coverage will pay for your medical expenses. Whether you or the other party caused the accident, your medical expenses for recovery will be covered.
• Uninsured Motorist - If you are hit by an uninsured driver, this coverage will pay for repairs to your car. If you do not have this coverage, then should you be in an accident with a hit-and-run driver, you will need to pay for the repairs out of your pocket.
• Underinsured Motorist - Akin to the uninsured motorist option, this coverage will pay for the difference between the actual repairs and what the other party's insurance policy will pay.
• Rental Reimbursement - Should your car need repairs after an accident, the rental reimbursement coverage allows you to rent a daily car. Typically, you are limited in the size of the car, daily cost, and overall length of time you need the rental.

These coverage options are usually combined in a single auto insurance policy. While you have the option to choose what coverage options you need, you must abide by the state's minimum requirements, along with your lien holder's expectations. Generally speaking, however, the more coverage you have, the better protected financially you will be should an accident occur.

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