Buying car insurance can be a complicated process. Not all policies cover the same situations, and if your insurance doesn't pay out for an accident you're in, you could be financially devastated.
To help you avoid financial holes, here, Major Insurance explains six common types of coverage you need to know about before buying a policy.
Liability Coverage: When you are at fault during an accident, liability coverage protects your bank account and covers the damage you cause to the opposing party. Having this insurance is a necessity for drivers. This coverage consists of two components: Property Damage Liability and Bodily Injury Liability (BIL).
Property Damage Liability will cover the expenses for any damage you cause to the colliding driver when you are the reason for an accident. BIL will pay for any medical bills that result from any injury you inflicted on the other driver during a said accident.
Comprehensive Coverage: Life happens, and comprehensive coverage has your back when it does. This coverage, which includes a deductible, goes into effect if your vehicle is stolen or damaged outside of an accident, for example, by fire, storm, tree branches, hail or vandalism.
Many auto lenders might necessitate comprehensive coverage if you are in the process of completing payments on your car or in a lease.
Collision Coverage: Regardless of who is responsible for initiating an accident, whether it be you, another person, or object, collision coverage financially protects any damages caused to your vehicle.
Collision coverage is good to have if you are accident prone or just cautious of the unexpected future. Seventy percent of drivers choose to buy collision coverage because liability coverage is only beneficial to you if the other driver causes the accident and can cover the damages with their liability coverage.
Personal Injury Protection (PIP): PIP covers any injury that you or your passengers undergo during an accident. Coverage can even go beyond medical bills and make up for lost wages if an injury keeps you from work.
Be sure to research your state's insurance requirements. Some states require you to have PIP, as well as other insurance policies, while in others it remains an option.
Guaranteed Auto Protection (GAP): GAP is ideal for drivers who are required to take out a car loan to purchase a vehicle. The average loan takes no less than six years to pay off, and during that time, the market value of the car can decrease fast. Realistically, the value of the vehicle already decreases the moment you drive it off the auto lot.
Comprehensive and collision coverage only covers the vehicle's present market value if your loaned car is in an accident. GAP substantially fills in the "gap" between the reduced cost-value and what you still owe on the vehicle and covers both.
Uninsured and Underinsured Motorist Coverage: You never know who is driving around you, let alone how much insurance they have if suddenly vehicles collide. Uninsured and Underinsured Motorist coverage helps protect you from accident costs if the opposing party lacks protection or has minimal coverage.
“Before settling on an auto policy, it is always smart to choose the right vehicle based on collision data, perform an annual rate check, maintain good credit, set the right deductible, and be on the lookout for discounts. These are just a few other ways to make sure you find the right policy while saving money,” said Major Insurance.