Types of car insurance coverage
While shopping for car insurance for the first time, you may encounter some unfamiliar terms. Understanding what they mean and how they apply to you can help you get the coverage you need for the best possible price. Let’s explore the different coverage types below.
Liability coverage
Liability coverage consists of two types of protection: bodily injury liability and property damage liability. Bodily injury liability covers any costs associated with injuries or death caused by the driver of your car, while property damage liability protects you financially against damage caused to another vehicle or property, such as a garage or fence.
Every state except for New Hampshire requires you to carry a minimum amount of liability coverage.[1] Even if you live in New Hampshire, it’s a good idea to have some liability coverage on your policy, especially as a new driver. If you do cause an accident, it will cover whatever damage you cause, up to your policy’s limits.
Full coverage
Full-coverage car insurance includes the state minimum liability coverage, collision coverage, and comprehensive coverage. Collision insurance will reimburse you for damage to your car if you’re in an accident or hit an object like a telephone pole, while comprehensive insurance will cover damage against theft and non-accident damage, like hail.
Full coverage typically costs more than liability coverage, but it can save you a great deal of money and stress if you need to make repairs to your car. However, if your car is old and not worth much, full coverage may not be worth it since the cost of repairs might exceed the value of your vehicle.
Uninsured motorist coverage
Uninsured motorist coverage protects you in the event of a hit-and-run or an accident with someone who has no car insurance. It can be a useful coverage to add to your policy if you can’t afford to repair your car or cover your medical expenses after an accident.
Underinsured motorist coverage
Underinsured motorist coverage protects you in the case of an accident with someone who doesn’t have adequate coverage and typically comes into play in the event of a serious car accident.
Medical bills can add up quickly and could go beyond many drivers’ coverage limits in a bad car crash. You’ll want to consider adding this if you don’t have excellent health insurance or frequently have passengers with no health insurance. You’ll definitely want to consider adding this type of coverage if you drive a luxury vehicle.
PIP coverage
Personal injury protection (PIP) coverage reimburses medical expenses and sometimes lost wages to you and your passengers after an accident. It’s required in some states but not all. It’s a good idea to add PIP coverage to a policy if you don’t have robust health insurance or you frequently have passengers with no health insurance.
