What are the types of car insurance coverage?

evidence of insurance 300x225 What are the types of car insurance coverage? Car insurance policies are not umbrella coverage for all damages resulting from a car accident but rather a mix of coverage options a driver chooses. Many different types of car insurance coverage exist so before securing a car insurance policy its important to know what type of coverage you need.

Most consumers search for the best car insurance rates however when it comes to looking for a car insurance policy you need to understand the types of car insurance coverage otherwise it will be hard to find the best policy for you and your family.

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Bodily Injury / Liability Insurance

All states (excluding New Hampshire) have minimum state requirements for liability insurance coverage. In fact, it is the only type of car insurance coverage required by all states. Liability insurance is defined as insurance for the liability caused to other persons/property when you are at fault in a car accident.

How much liability insurance do you need? This will depend on where you live as states have defined minimum car insurance requirements for liability insurance and anyone registering or operating a vehicle must carry liability insurance. However, state minimum requirements are usually much lower than you really need and most drivers opt for additional coverage.

Learn more about the need to obtain additional car insurance above state minimum requirements here

It�s important to note that liability insurance DOES NOT cover damage or injuries sustained by you or to your vehicle – only damage to others!

Collision Coverage

Collision coverage is basically the physical damage coverage part of a car insurance policy. Collision coverage provides insurance for damages to your vehicle (the insured) if it is damaged in an accident or by an object under covered events.

Almost all drivers with late model cars opt for collision coverage however if you have an older vehicle which is not worth a whole lot it may be wise to analyze whether or need the cost of carrying collision coverage is right for you. If your vehicle is financed with an auto loan company however you will be required to carry collision coverage until the loan is paid in full.

Comprehensive Car Insurance

Comprehensive car insurance is another part of auto insurance coverage which protects against physical damage. Your vehicle can incur damage by many ways outside of a typical car accident including damage by fire, theft, storms, road debris etc. Should any damage occur to the vehicle outside of a �collision� the comprehensive portion of your car insurance policy will kick in and cover repair costs up to your policy limits. Think of a windshield crack or asphalt falling from a roof � this type of damage is covered under your comprehensive car insurance coverage.

GAP Car Insurance

Gap car insurance is coverage against the GAP in the vehicle�s book value and any car loan financing you have against it. For example, if you purchase a brand new car for $30,000 the moment you drive it off the lot its book value may be 22 or $23,000.

What would happen if you got in an accident next week and the car was determined a total loss?

GAP insurance would pick up the cost of the GAP between your car loan balance and the book value leaving you with no liability (outside of your deductible). Without GAP car insurance it�s quite likely you would owe the car loan company a sizeable chunk of change subject to immediate payment. Once a car gets 2 or 3 years old GAP insurance is less important as your financial obligation starts to become on par with the book / replacement value of the vehicle.

Uninsured Motorist / Underinsured Motorist Coverage

These two types of coverage usually always go together and are commonly referred to by their acronyms in many insurance documents – UM and UIM.

Uninsured Motorist (UM) and Underinsured Motorist (UIM) car insurance coverage provides protection against injuries to the driver and passengers in the event of a car accident with a driver who is either uninsured or underinsured. It also kicks in during the even of a hit and run since technically the party that �ran� is categorized as an uninsured driver. UM and UIM car insurance coverage can also pay for medical expense, lost wages and more.

The number of uninsured motorists on the road is actually at a staggering level and all drivers should really consider adding Uninsured Motorist and Underinsured Motorist Coverage to their car insurance policy.