Demystifying Car Insurance Coverage

Making sense of car insurance can be daunting given the various different coverage options available. What does each one cover, when do you need to get it and when is just not worth the money you pay. Well they say knowledge is power and we’ll be giving you some today. This article will talk about a few of the most popular car insurance coverage and (hopefully) help you decide whether you need them or not. When you compare auto insurance quotes online, it’s important that you pick a company not just on the basis of the rates they give you, but also whether the amount of coverage they give you is worth the price.

Gap Insurance:

GAP stands Guaranteed Auto Protection. If you take a car on lease or loan, and have an accident where the car is totaled, Gap insurance will cover the difference between what the insurance gives you for the car and the amount outstanding on your debt. Due to high depreciation costs and the low resale value of cars, the value of your car drops significantly immediately after you buy it and continues to do so. So Gap insurance is very important for those who take a loan or lease to buy a car.

Liability:

You are required to have some liability coverage in order to drive legally, though the amount varies from state to state. If you get into an accident and are found at fault, liability coverage will take care of the damages the accident caused to the other party. Bodily injury liability coverage will cover the other party’s medical bills incurred due to accident injuries. Property damage liability coverage takes care of the damages you have caused to the property and assets that do not belong to you. You definitely need this, not only because the law requires it, but because if you don’t, you could be responsible for thousands of dollars in damages to life and property if found at fault.

Collision:

Collision coverage takes care of the damages to your car if you hit another car or stationary object, no matter whose fault it is. This kind of coverage is important for two reasons. Firstly, if you crash into a stationary object or are found at fault in an accident, you will have to pay for your car’s repairs yourself if you don’t have coverage. Secondly, if the other party is found at fault but doesn’t have insurance, you can sue them, but there is no guarantee of having your damages covered by them, and this is where collision coverage comes into play.

Comprehensive:

A broad explanation of comprehensive coverage would be that it takes care of damages that are not caused by a motor accident. You might think that the worst that can happen to your car is a collision. But that’s probably because you haven’t seen what a hailstorm or an angry vandal can do. If your car is stolen, vandalized or damaged due to certain natural disasters, encounters with an animal, fire, falling objects, your comprehensive coverage will have you covered.

Note: Collision and Comprehensive are important, but you can think about dropping them if your car’s value is lower than the total of your deductible and insurance rates. If you can afford to pay for damages towards of replacement of your car yourself, you don’t need these.

Personal Injury Protection (PIP):

This coverage compensates you for medical payments incurred by you and other passengers in your car. Some car insurance companies also cover lost income, trauma, and services in the event of an accident. Some states require that you carry PIP and it is enforced to protect you against the rising numbers of the uninsured and underinsured motorists. Many people choose to purchase it even if it isn’t required to protect themselves from the possibility of suffering medical expenses and loss of income.

Underinsured Motorist Coverage and Uninsured Motorist Coverage (UIM/UM):

This coverage is also compulsory in some states due to the high incidence of un/underinsured drivers on the road. This coverage pays for damages to your own self and vehicle if the other party does not have insurance/has insufficient insurance. Someone who has adequate collision and PIP coverage does not need this coverage (unless mandated by the state) because collision and PIP encompass the benefits of UIM/UM.

Getting just enough insurance to drive legally may seem tempting, however, the potential damages, debt and financial burden of an accident severely outweigh the money you would spend on getting thorough coverage. With this article, you can understand the benefits of each coverage type, determine how applicable it is to you, and make the right call. Remember, you can get cheap auto insurance quotes without compromising on coverage if you look hard enough.