Auto Insurance – Which Type Is Right For You?
Everybody knows car insurance is great for anyone who owns a vehicle. It can give you peace of mind and potentially save your life, depending on the situation. But when it comes to what kind of insurance policy to choose, things can get a little confusing. We're here to help!
So which auto insurance type is right for you? This article will briefly discuss the four main types: liability only, comprehensive and collision coverage, liability with full coverage (also known as “full package”), and no-fault auto insurance.
Liability Only Insurance
This type of policy will handle your legal liability in the event of an accident. You're legally required to have this kind of coverage if you want to register your car(s) with the state. If someone is injured when your vehicle causes a crash, then you're liable for their medical bills (and other costs). Your policy will help cover those expenses. Comprehensive and collision coverage are not required by law. But they can be a good investment if you drive a car that's worth more than $3,000 or if you always use public transportation and never drive yourself (cabs, mass transit, etc.).
Comprehensive and Collision Insurance
These types of policies combine full coverage with the legal requirement of liability insurance. There are a variety of ways you can get those two things combined, especially if you purchase your policy through an independent agent or broker. However, there are usually three main options:
Driver's Liability Only – This type of coverage will protect you from liability in the event your car crashes. But it doesn't pay for other damages (like property damage and medical expenses). The coverage amount will be determined by your state's minimum DMV registration requirements for vehicles over a certain value. The more expensive and higher value the vehicle, the higher the minimum required amounts are likely to be.
This type of coverage will protect you from liability in the event your car crashes. But it doesn't pay for other damages (like property damage and medical expenses). The coverage amount will be determined by your state's minimum DMV registration requirements for vehicles over a certain value. The more expensive and higher value the vehicle, the higher the minimum required amounts are likely to be. Minimal Liability – This is similar to the Driver's Liability Only policy above, but it also defines what events are covered by damages. In this case, damages may include losses and injuries to other passengers, pedestrians or anyone not involved in a vehicle collision.
This is similar to the Driver's Liability Only policy above, but it also defines what events are covered by damages. In this case, damages may include losses and injuries to other passengers, pedestrians or anyone not involved in a vehicle collision. Full Coverage – This is the most comprehensive type of policy. It covers all damages (other than bodily injury or wrongful death) resulting from a crash. And it may even cover additional legal expenses, like attorney fees for defending lawsuits you're involved in because of an accident.
Liability With Full Coverage (also known as "Full Package")
This type of coverage is very similar to the "full coverage" described above. However, it's much more common for people to purchase this type of policy since they can purchase it through an insurance agent or broker.
Coverage Limits are higher than other, "basic" auto insurance plans. The state may require you to carry minimum amounts of coverage, depending on your car's overall value and when you first register it.
are higher than other, "basic" auto insurance plans. The state may require you to carry minimum amounts of coverage, depending on your car's overall value and when you first register it. You're usually required to be a licensed driver in order to get this type of coverage (and perhaps even required to have a very low-risk driving record).
to get this type of coverage (and perhaps even required to have a very low-risk driving record). Liability amounts are higher than "basic" auto insurance plans. The amount will depend on the value, make and model of your vehicle.
are higher than "basic" auto insurance plans. The amount will depend on the value, make and model of your vehicle. You're responsible for injuries or damages caused by an accident, no matter who was at fault (not even the police or other drivers involved).
No-Fault (also known as "no-fault") Auto Insurance
This type of policy is usually sold by a state or local government as a way to reduce car insurance costs for most drivers. Under no-fault laws, you're usually required to carry this kind of coverage no matter how much you're paying for your regular policy. In many states, you won't be able to purchase this level of coverage if you are leasing your vehicle or if your car (or any other motor vehicle) is older than the law now allows. This type of auto insurance covers certain medical and property damage costs that occur in a crash, regardless of who is at fault. The insurance company pays your medical bills and compensation for lost wages. For example, if you got injured in a crash and needed to take off time from work to heal, the insurance company would pay your wages. Once you've claimed your payout, then the other driver's car insurance company would pay you for any medical bills or property damages that they caused when they were at fault (when they caused the crash).
This type of coverage is usually more expensive than regular auto insurance. But it might be worth it to protect yourself from some losses that can occur during an accident.
Conclusion
As you can see, the basic types of auto insurance policies available to drivers can be a bit complicated. But you'll need to research and figure out which one will work best for your own situation. You'll just need to be prepared to make sure that you have the right type of auto insurance coverage in place so that you don't get hit with expensive penalties or fines if there's ever an accident or other major incident that occurs while you're driving your car.
This article was updated by Nia Shanks on 01-26-2018. The information presented in this article is intended as education about auto insurance policies, but not as legal advice for any particular situation or particular reader.