Many people aren’t aware but car insurance isn’t mandatory in some states! Alabama, Iowa, and Mississippi (among others) don’t require you to have any type of car insurance; a bond, cash deposit, or approved self-insurance are the only legally requirements. In other states, you have to provide proof of insurance when registering your vehicle. According to ‘financial responsibility’ laws, you must show that you can cover the costs of being involved in a car accident. What are the differences in the policies you can avail of? We have broken them down here so you can know exactly which types of car insurance you need for you and your car.
This type of car insurance is somewhat limited. It’s cover includes bodily injury liability – any injuries you cause to someone else – it also covers property damage liability – damage to someone else’s property. In most states, liability insurance is compulsory though its cover tends to leave drivers needing a lot more. If you’re involved in a serious crash, the limits on this type of policy are usually inadequate to cover everything. If your liability exceeds your insurance cover, you have to use any assets you own to pay off the damages, until you are bankrupt. You’re recommended to take out a personal liability umbrella policy to increase your liability limit.
No-fault insurance (or PIP) means that if you are involved in an accident, you can claim from your own insurance company for any injuries you sustain (up to a certain limit). You do not have to go to court and prove another party’s fault. PIP insurance does limit your ability to sue for general damages – it only covers bodily injury rather than any vehicle damage. It is similar to having a second health insurance policy. It can (again up to a limit) cover hospital fees, and lost wages.
PIP Medical Expenses Insurance
This is similar to ‘no-fault insurance’ but it covers only medical expenses. It covers anyone’s bodily injuries that was in your vehicle at the time of an accident. The policy even covers you if you’re involved in an accident outside of your vehicle. Most people who have ‘comprehensive insurance’ don’t require PIP.
Catastrophic Medical Expenses Insurance
This one is dependent on your level of health insurance. High-cost medical bills are covered by this type of policy allowing you peace of mind if you’re accident is serious. Depending on what your health insurance policy covers, you may not even need it.
Uninsured Motorist Insurance
Many states have brought in uninsured motorist laws which mean that insurance companies have to include this type of car insurance in their basic policies. It covers you in case you’re hit by an uninsured driver (whether you’re driving or walking). If you have collision insurance you do not need this insurance though depending on the city you live in, the chances of being hit by a driver who is not insured can increase dramatically. It is definitely advisable to do some research based on the city you live in before you opt for or against this insurance.
Under-Insured Motorist Insurance
This is pretty much the same as the above; if the driver who hits you doesn’t have the sufficient insurance to cover the damages caused to you or your vehicle. It is only relevant if the accident is the cause of the other driver.
This type of insurance is for any damage caused to you by your own vehicle – no matter who is responsible. The cover usually has an excess which is deductible. The higher your excess, the lower your premium. This type of car insurance is dependent on the value of your car and if you do choose to add it to your policy, you won’t need uninsured motorist insurance.
Comprehensive car insurance covers the loss of your vehicle through fire, theft, vandalism, natural disasters, or accidental glass breakage. It doesn’t cover accidents with other vehicles, and tends to have a lower excess than collision cover.
Miscellaneous Extra Insurance
Protection against costs accrued from damage to your usual vehicle. This means cover for having to rent a car, or the costs of a breakdown.
This is the overall cost of your policy. Car insurance companies determine the price of your premium based on factors including your address and the crime statistics there etc. Other influencing factors include:
- Make and model of your vehicle.
- The age and value of your vehicle.
- Your age, sex, and occupation. Men 27 and younger tend to be charged higher premiums.
- Your driving experience and record. If you have never claimed from an accident before your ‘no claims bonus’ will stand to you.
- Your health.
- How much you drive (measured in miles per year).
Need help figuring out where to start? check out our list of the best car insurers in the US. When you’re buying car insurance, remember to always shop around. Check out any discounts that apply to you, and see what your state covers in its ‘financial responsibility’ laws so you aren’t paying anything more than you need. There are so many types of car insurance available to people it can just get confusing so hopefully this breakdown helps you in your process!
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