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Types of Car Insurance Coverage

Many types of car coverage can be found within an auto insurance policy. Each part of a car insurance policy has a different role to fulfill. Each portion of coverage insures the covered policy holder against a different type or area of risk. The general purpose of auto insurance is to protect you from risk by allowing a provider to take on at least some of that risk on your behalf in exchange for the policy premium you pay as a customer. In different states across the country, there are different variations of state laws mandating auto insurance for all drivers. The requirements particular to each individual state will determine the necessary parts of an auto policy each driver has to include in their coverage. For the purposes of a general discussion, it is sufficient to focus on liability coverage since this is a common thread across state laws for car insurance.

Some states also require other forms of insurance as well. Uninsured and underinsured motorist coverage are mandatory in some states but optional in others. Collision and comprehensive insurance are common to many auto policies, but not legislatively required. They are needed for drivers in certain situations, however. Having a broad understanding of the different basic parts of an auto policy can help you as a driver to make decisions on your own plan and to put together a package of protection that suits your individual needs.

Liability Required for All Drivers

Liability is the one element tying together all auto policies. Every drive needs liability protection as required by state law, so this portion of your policy represents its cornerstone or foundation. Liability insurance is important because it safeguards insured policy holders from what could otherwise be very expensive financial charges in the wake of at fault auto accidents. With many states subscribing to financial responsibility laws in their state auto codes, drivers have to be responsible for these costs one way or another. Certainly the cheapest way is to simply have available a liability plan to cover your obligations in the event of an accident.

Different states use different forms of liability insurance, but there are similar areas of coverage to each of them. Each plan has bodily injury and personal property liability protection. The bodily injury protection generally is divided somehow between single victim and single accident liability, making a distinction in coverage for single and multiple injury victims for whom you are responsible as the liable driver. Some states have single form liability plan that does not separate monetary limits for different areas of coverage, but these are still the things those plans pay for. The other part of liability auto insurance policies is property damage coverage. This takes care of damage or destruction to road signs, buildings and other property as well as to other cars aside from the covered automobile.

It is important to note that liability insurance offers no protection for the driver's own injuries or damage to his or her vehicle. It is strictly meant to help satisfy your financial responsibility to others in at fault accidents.

Uninsured and Underinsured Motorist Coverage

With this being said, not all drivers carry liability coverage even though it is the law. In fact, not all drivers have any insurance at all. Some choose to take a gamble instead and drive around on the road with no policy to protect them and others in the event of an accident. For this reason, uninsured and underinsured motorist coverage came into existence. They are an unfortunate necessity by which the insured part of the driving population basically pays the costs of the uninsured.

An uninsured motorist policy is just what its name suggests. It offers the covered driver protection against other motorists who happen to be out on the roads operating their automobiles with no insurance protection. If you get into an accident with an uninsured driver, your uninsured motorist policy will go to work to pay for damages that ordinarily would be taken care of by the other driver if he or she were at fault in the accident. It is to the chagrin of many drivers that this sort of coverage is legally required in some states along with personal injury protection (PIP). The common complaint is that these policies are letting uninsured drivers off the hook by forcing those who carry insurance plans to pay for their insurance obligations as well as their own.

There is some truth to this argument based on the specific way uninsured (and underinsured) motorist protection work. But even so, it is better to focus on the positive and think of this policy type as another way you can protect yourself as a driver from what could otherwise be a very expensive auto accident if you have no insurance protecting yourself from these drivers. This coverage also comes in handy in hit and run situations, which are treated by insurers as uninsured claims.

Comprehensive and Collision Policies

Comprehensive and collision motor vehicle coverage are not required by any state law, but they are mandatory for drivers in certain situations nonetheless. If you have a leased vehicle or if you are making payments on a loan from a bank or other lending institution, you likely need to carry both collision and comprehensive insurance to satisfy the terms of your loan or lease contract. Lien holders write these terms into their contracts to protect the financial investment they make in these vehicles in the event of a total loss prior to the loan or lease being paid off. If you were to total your car your insurer would still require you to keep making payments on the loan, requiring collision helps them to get repaid for their investment in a higher percentage of cases.

Comprehensive insurance is a policy that takes care of losses to the vehicle unrelated to collisions. If your car is stolen and not recovered, or if it is recovered but there is theft related damage to the car, this would be a comprehensive coverage claim. If your car is destroyed by a garage fire or if a storm does significant damage to it while it is parked outside your home, once again, this is a comprehensive issue. The name for this area of coverage is somewhat of a misnomer because as with any policy, there are always exclusions and limitations to coverage. You should familiarize yourself with all these terms before you sign on for any policy and certainly before attempting to make a claim on your comprehensive plan.

There are many different types of car insurance coverage and many different areas of protection you can get into as a consumer of these plans. It is important to have a good understanding of what each area represents and what it specifically does to protect you and your car. When you have this basis for understanding, you can make better choices on your policy to increase its value while also saving you money. Take a closer look at the different types of auto coverage and the options you have for protection as an auto policy consumer. Make good choices based on sound information.

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