Common types of car insurance coverage

Car insurance can be tailored to a variety of drivers ' needs, which means there are many different components to a car insurance policy. At the very least, you need to meet the state's minimum coverage requirements to be able to drive legally. In addition, you may want to consider whether you want full coverage to help avoid additional costs beyond your coverage limit. Bankrate explains the differences between different types of car insurance coverage and the key considerations to consider when looking for the right coverage for your needs.

The most common types of car insurance

Although many of the best car insurance companies have different coverage plans to choose from, you may find it easier to understand your policy if you divide it into two types of coverage: mandatory and optional.

Coverage of liability (liability), such as bodily injury and property damage, is almost always mandatory. Depending on your state's minimum requirements, you may also need to have personal injury protection and uninsured motorists. Personal vehicle coverage, on the other hand, is optional (unless you finance or rent).

Mandatory: liability insurance

Being responsible means you are legally responsible for something. When it comes to car insurance, liability refers to the damage and injuries you cause during a car accident. There are two types of liability offered in most standard auto insurance policies: bodily injury and property damage.

Bodily injury liability (BI)

What's covered: bodily injury liability coverage pays the other party's medical bills if you're at fault in the accident. Most often, your insurance company will write down bodily injuries on a per person, per accident basis. For example, you might see $25,000/$50,000 listed in bodily injury liability on your car policy. This means you have $25,000 bodily injury coverage per person, with a maximum of $50,000 per accident.

Property damage liability (PD)

What's covered: property damage liability coverage pays the cost of repairing damage you caused to someone else's property — not yours — in an accident you caused. Your insurance company will probably write this down as a single limit. For example, you might see $25,000 in property damage coverage on your car policy

Additional Options: Vehicle Protection

In addition to compulsory liability insurance, you may want to consider other types of optional protection for your vehicle, such as collision and comprehensive protection, especially if your vehicle is new or has a high value. This type of protection is not required by law, but if you have a loan or lease a vehicle, your lender will likely ask for such protection.

Collision (COLL album

What's covered: collision protection pays for damage to your vehicle regardless of who was at fault in the accident. In contrast to liability protection options, collision protection has no written limits. Instead, this protection will cover the value of your vehicle after depreciation is taken into account, which is also called the actual cash value or ACV. This protection has its own deductible amount, that is, the amount of money for which you are responsible.

Comprehensive (COMP or OTC)

What's covered: comprehensive coverage pays for damage to your car caused by natural disasters (such as hail, wind, and flooding), fire, theft, vandalism, falling objects, and collisions with animals. Comprehensive protection also covers the windshield of your car. Like Collision Protection, comprehensive protection also has its own cost deductions.

Property damage caused by uninsured driver (UMPD)

What's covered: uninsured driver's property damage protection pay for repairs to your vehicle if you're hit by someone who doesn't have insurance. In some states, protection for property damage from uninsured drivers is mandatory. In other countries, this protection is not offered. If this protection is available in your state, it will usually have a small rebate of its own, around $100 to $300.

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