The basic principle behind automobile insurance coverage is to cover the costs of injuries or damages resulting from traffic accidents and to protect vehicles against other perils such as theft and vandalism.

There are many different types of coverage, and each one compensates the policyholder in a unique way. Most common is the liability policy which most states make a requirement in order to legally operate a motor vehicle on the roadways.

Types of Car Insurance Coverage and What They Cover

Here are types of insurance coverage followed by a description and purpose.

Liability:

This is one of the most common types of policies and there are two parts to this coverage, the first of which is is Bodily Injury. This will cover a third party for bodily injuries sustained up to the specified limits as a result of a traffic accident where the policyholder is found to be at fault. The second part is Property Damage, which will pay for damage to another person's property caused by the insured while driving the covered vehicle. This does not only pay for damages to cars, but may include compensation for incidents where a fence or home is damaged as well.

Liability coverage is required by most states' laws, but the minimum limit requirements varies with each state. For example, California's minimum limits are $15,000 for bodily injury to one person, $30,000 for bodily injuries to two or more people and $5,000 for property damage. These limits are relatively low when compared to the cost of medical care and the costs of repairing or replacing vehicles. It may be wise to consider raising the limit when purchasing a policy.

Comprehensive and Collision:

This is a common addition to a liability policy and when in combination is often referred to as "full coverage". Unlike liability, this covers the insured's vehicle. This includes collisions with other vehicles or objects, theft, fire, vandalism, a collision with an animal, windstorms, flying objects, broken windows, and hail.

There is usually a deductible that is involved when purchasing this coverage. Deductibles are commonly found in the amounts of $250, $500, and $1,000. This is the amount that the insured would have to pay in the event that he or she files a claim. Policyholders can choose the amount of the deductible and the amount of the deductible chosen will directly affect the price of the premium. The higher the deductibles, the lower the premium and vice versa.

No Fault (PIP)

Some states follow the no fault system. This means that the insurer will pay for medical expenses, loss of wages, and other injuries regardless of who was found to be at fault for the accident, up to the policy limit. This coverage is also known as Personal Injury Protection (PIP). This will compensate the policyholder and their passengers for their injuries.

Uninsured/Underinsured Motorist

There are states that make this a requirement, and even if not, it is a beneficial addition to a policy. This will compensate the insured for bodily injury caused by motorists who do not have coverage, are underinsured or if they are struck by a hit-and-run driver.

Medical Payments

The insured will be compensated for medical expenses and/or funeral costs that are the result of an auto accident, up to the policy limit.

Rental Car Coverage

This will pay for the cost of a rental car in the event that the policyholder files a claim and must have their automobile taken to a repair facility for repairs or if their vehicle is stolen. There is usually a set amount paid per day and it usually covers up to 30 days.

Roadside Assistance

These plans vary but usually include towing reimbursement, tire service (mounting the spare tire) , battery service, emergency gasoline supply, and locksmith services. Some plans offer perks like discounts on rental cars and theme parks.

All of these types of policies can be beneficial. Drivers should carefully evaluate their situation in order to determine which they should purchase and which they can go without. The best choice in coverage is the one which is affordable yet offers the most extensive protection.