There are seven types and their coverages.


You pay your car insurance bill. You don’t put it to use and don’t want to spend. It is money you can’t live with, no matter how important it is to your financial security or loan requirements.

Your car insurance policy could include both mandatory and optional coverages. Depending on your financial situation and vehicle condition, you might not require all types of Insurance.


Liability insurance is the foundation of your car insurance policy. To be able to legally drive your car in many states, liability insurance is required. Liability insurance will cover any property damage and injuries if you are in an incident.

Each state has its minimum liability insurance coverage. (New Hampshire, Virginia and other states do not require liability insurance. They do have financial requirements drivers must follow.

Although the state sets the minimum coverage for bodily injury, many drivers buy more Insurance than that. This protects their assets, such as their homes and bank accounts, in the event of a lawsuit.

Forbes quotes figures from the National Association of Insurance Commissioners, which report that liability insurance costs an average of $650 per year.


Collision insurance covers your vehicle if it is involved in an accident with another vehicle or hits an object like a pole. It will pay for the replacement or repair of your vehicle if it isn’t repairable. If you are a car loan holder or leaser, your lender may require you to have collision insurance. This is to protect your lender’s investment in your vehicle. Once you have paid your deductible, coverage starts.

Once your loan is repaid, buying collision insurance won’t be necessary. Before you drop collision insurance, make sure that your finances are sufficient to cover the cost of replacing or repairing your vehicle or truck in case of an accident. If your vehicle has a lot of miles and is older, collision insurance might not be worth it. Forbes reports that collision insurance is expensive at an average of $381 per year and that 74% of policies include it.


Comprehensive Insurance covers any injury to your vehicle that is not caused by collisions with other vehicles or fixed objects. Comprehensive Insurance protects you from losses due to acts of nature such as hail, floods and earthquakes. Comprehensive Insurance also covers you against damage from falling objects and collisions with animals. Comprehensive insurance policies can also include vandalism and theft coverage. Comprehensive Insurance includes a deductible.

If you own a vehicle, comprehensive insurance may be an option. Forbes estimates it costs $172 per year, with 78% of policyholders purchasing comprehensive coverage.

Personal Injury Protection

Personal injury coverage (PIP) covers injuries sustained by the policyholder’s driver and passengers while driving. It pays for funeral expenses, and it reimburses people who are hurt because of lost wages. Some states require this Insurance.

For medical payments, indemnity insurance

You and your passenger, regardless of fault, will be covered for any medical expenses. This coverage is a great addition to your medical insurance, especially if you have high deductibles.

  • Motorists without Insurance or who are underinsured
  • You have sufficient coverage to guard drivers and occupants of other vehicles in an accident. However, not all motorists have the same coverage. Uninsured motorist coverage will pay you for any damages caused by hit-and-run or uninsured motorists.
  • Insurance for underinsured motorists protects you in the event of an accident caused by someone who doesn’t have sufficient coverage to pay all damages.
  • Certain states require motorist insurance to cover the uninsured and underinsured.

Insurances that are not listed here

A representative from an insurance company will be able to inform you about other insurance options. These may include:

  • Gap insurance covers the difference between what your collision or comprehensive coverage pays and everything you owe to your vehicle if damaged. Your primary Insurance will pay the cash value for your vehicle. If it is less than what you owe, your primary insurance will cover the cash value of your vehicle.
  • Renter’s Insurance covers rental cars in the event of an accident or while they are being repaired.
  • Roadside assistance insurance will cover you for an emergency, such as locking your keys in your car or truck, jump-starting your battery or changing a flat. You can also tow your vehicle to a shop.
Brian Santiago

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