What Are the Typical Components of an Auto Insurance Policy?

Oct 10, 2022 | Your Policy

What Are the Typical Components of an Auto Insurance Policy?

If you’re thinking to buy a new car or shopping for auto insurance, you’ll need to understand the common types of coverage available on a car insurance policy. The various types of car insurance coverage are available to help protect you, your passengers, and your vehicle if you’re involved in a car accident.

There are six common car insurance coverage options, and depending on where you live, some of these coverages are mandatory and some are optional. Understanding what’s required in your state and what each helps cover can help you choose the right coverage for your situation.

  • Liability Coverage
    • Auto liability coverage is mandatory in most states. Drivers are legally required to purchase at least the minimum amount of liability coverage set by state law. Liability coverage has two components:
      • Bodily injury liability may help pay for costs related to another person’s injuries if you cause an accident.
      • Property damage liability may help pay for damage you cause to another person’s property while driving.
  • Uninsured and Underinsured Motorist Coverage
    • If you’re hit by a driver who doesn’t have insurance, uninsured motorist coverage may help pay for your medical bills or, in some states, repairs to your vehicle. If you’re hit by an underinsured driver, that means they have car insurance, but their liability limits aren’t enough to cover your resulting medical bills. That’s where underinsured motorist coverage may help.
      • Uninsured and underinsured motorist coverage is not required in all states.
  • Comprehensive Coverage
    • Comprehensive can help cover damage to your car from theft, fire, hail, or vandalism. If your car is damaged by a covered peril, comprehensive coverage may help pay to repair or replace your vehicle (usually up to the vehicle’s actual cash value). This coverage has a deductible, which is the amount you’ll pay out of pocket before your insurer compensates you for the damage.
      • Comprehensive is typically an optional coverage — but your lender may require it if you’re leasing or paying off your vehicle.
  • Collision Coverage
    • If you’re involved in an accident with another vehicle, or if you hit an object such as a fence, collision coverage may help pay to repair or replace your car.
      • Collision coverage is usually optional, though It may be required by your vehicle’s leaseholder or lender.
  • Medical Payments Coverage
    • If you, your passengers, or family members who are driving the insured vehicle are injured in an accident, medical payments coverage may help pay for costs associated with the injuries. Covered costs may include hospital visits, surgery, X-rays, and more.

Medical payment coverage is required in some states and optional in others. Personal Injury Protection, which may help pay for your medical expenses after an accident, is only available in some states. PIP may also help cover other expenses incurred because of your injuries —for example, child care expenses or lost income.

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