Auto Insurance Explained in Simple Terms
Auto insurance, is insurance that you purchase for your cars,
trucks, motorcycles and boats etc. It provides you with
protection from losses that may incur as a result of a car
accident. While this may sound simple enough to understand there
are many types of auto insurance policies available to you and
it can be rather confusing. Your coverage level and types will
vary depending on the policy that you choose. In general, these
are the most common types of auto insurance programs available
to you:
The Different Auto Insurance Coverage Available
Collision Coverage: insures your vehicle against repairs if the
vehicle is in an accident or the cost of purchasing a new
vehicle if yours is damaged beyond repair.
Comprehensive Coverage: insures your vehicles against the cost
of purchasing a new vehicle should yours be stolen or destroyed
in a fire.
The Different Auto Insurance Coverage Protection
Personal Injury Protection (PIP) - insures against medical
expenses and lost wages related to ownership or maintenance of a
vehicle. This insurance is mandatory in most states, but not all
so be sure to research your state requirements prior.
Medical Payments (MP) - insures against medical expenses for
bodily injury sustained in an accident that is beyond any of the
expenses that are covered by personal injury protection (PIP).
Legal liability claims against the owner or driver of the
vehicle causing damage or injury to a third party involved in an
accident. Liability Insurance only covers legal liability.
Comprehensive Insurance covers PIP, MP and legal Liability. In
the U.S. liability insurance covers claims against the
policyholder and also that of any other operator of the
insured's vehicle. If any other operators reside at the same
address, they must be additionally covered on the auto insurance
policy.
Comprehensive Insurance covers most details of damage which can
affect the car, the driver, there is risk associated with buying
a new car that is not covered even by comprehensive insurance.
Basically, once the car is bought, there is a decline in the
cars total value. During this period the remaining car payments
exceed the value of the vehicle, thus making the compensation
the insurer will pay for a totaled (destroyed) vehicle. To help
with this scenario the insurer can purchase GAP insurance. GAP
insurance will cover these costs. GAP insurance was established
to provide protection to consumers based on the buying and
market trends.
As you can see there are many different auto insurance
considerations when picking a new insurance policy. Be sure you
understand them all in detail and that you have the best
coverage for you, your car and your family should you need it if
you get into an accident. Also keep in mind that these are
general guidelines and the laws may vary within your state so
ask questions!