Auto insurance is a legal requirement in almost every state in the USA. Not only is it the law but it is essential in safeguarding your financial situation and protecting everyone else on the road.
In this guide we shall look at auto insurance policies and the different types of coverage.
Types of Auto Insurance Policies
There are numerous types of auto insurance policies to choose from – in fact you will be spoilt for choice! Whilst there are similarities and general types of auto insurance policies there are a whole range of extras meaning you can find an auto insurance policy that suits your needs and budget.
We shall look at some of the most common auto insurance policy types and coverage below.
Fully Comprehensive Auto Insurance
Fully comprehensive auto insurance is the most extensive coverage you can get for your vehicle – and also the most expensive.
However it is one of the most common types of auto insurance largely because many finance companies require that people who have bought their cars on finance must have fully comprehensive auto insurance.
Fully comprehensive car insurance insures the owner of the car against all type of potential incidents including both accidents and theft or vandalism of the car. It even covers your car should it be damaged during an earthquake or hurricane.
Be aware that not all insurance companies will insure up to 100 percent of the value of the car, many only insure it for 80 percent of its value.
Third Party, Theft and Fire Auto Insurance
Third party, theft and fire auto insurance is a middle of the road auto insurance policy that provides you with slightly more coverage than the basic policy which we shall look at below – and not quite as much as the fully comprehensive insurance.
This type of insurance provides you with cover for most events that are covered by fully comprehensive auto insurance including fire and theft. However, in the event of an accident the insurance company will only pay out if you are at fault and you hit another car. So if you hit a post or only damage your car and no one else’s then you are not covered.
Third Party Auto Insurance
Third party auto insurance is the most basic type of auto insurance you can get – and is the minimum requirement of 47 of the states in the USA. Third party auto insurance only covers circumstances in which you are involved in an accident, you have hit a third party and you are at fault.
In any other event the insurance company is not required to make a payout. This is the cheapest type of auto insurance you can buy and is only recommended for those that have an old car or one that has very little value making better insurance coverage not worthwhile.
Specialized Auto Insurance
As well as the basic types of auto insurance policies and coverage, there are also more specialized auto insurance options.
If your car is older than 25 years it can technically be classified as a ‘classic’. This type of car should be insured as a classic car which has different benefits and requirements. Auto insurance for classic cars usually has the same benefits as fully comprehensive car insurance however you have the slight disadvantage that classic car insurance usually limits the number of miles you can drive each year. Be sure to check your policy carefully to see what limitations it has.
Rental Reimbursement, Collision Insurance and Medical Coverage
Rental reimbursement, collision insurance and medical coverage are just three of the extras you can have on your auto insurance. Rental reimbursement on an insurance policy means that should your car be destroyed, stolen or damaged then the insurance company will provide you with a rental car to use whilst your car is being fixed or replaced.
Collision insurance means that your insurance company will pay for any damages that are caused to your vehicle due to a collision with another vehicle or object.
Adding medical coverage to your auto insurance policy means that the insurance company will pay all the medical expenses regardless of who was at fault if the injuries occurred during an auto accident.