Car Insurance Coverages – What Are They?

Buying auto insurance need not throw you into fits of confusion. By understanding what your needs are and what coverages are available to you, you will be able to choose the right policy.

Liability Cover. Liability coverage pays others for damages resulting from a car accident that you cause. It also pays for a lawyer to defend you if you are sued for damages.

Comprehensive Coverage – Comprehensive coverage is intended to cover damage to (or the loss of) the insured vehicle resulting from causes other than collision such as storm damage, theft, vandalism and fire.

Collision Coverage – With collision coverage, your auto insurance company pays for damage to your car if it is involved in a collision with another vehicle or with a stationery object, no matter who is at fault.

Uninsured/Underinsured Cover – Uninsured motorist cover is available for protection if you are involved in a traffic accident with a driver who is either uninsured or underinsured.

GAP Coverage. We all know that there is a sharp decline in the value of a car immediately after purchase. This means that any loan you took out to finance the purchase of the vehicle could be many thousands of dollars greater than the amount your auto insurance company would pay out if your car was stolen or became a total loss following an accident. Gap cover or loan/lease cover as it is also known is intended to bridge that gap in valuation and the amount you owe on the loan.

Personal Injury Protection (No Fault). This form of cover is only required in “no-fault” states but is optional in others and covers injuries to yourself and others in your vehicle regardless of fault.

Pay-Per-Mile – Pay-Per-Mile insurance is a novel approach to possibly saving money on car insurance. With this type of insurance the price of your premium would be directly linked to the number of miles you drive. The fewer the miles, the lower the costs would be. This sounds promising, but it does suffer from two major drawbacks. Firstly it is available in very few states (around 12 at the time of writing) and secondly it involves the insurance company fitting a tracking device to your car.

In the end, getting the best premium and coverage that fits your budget is a balancing act.

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