Auto insurance quotes for the main types of coverage

Insurance should not be rocket science. On paper, it’s a simple contract which requires the insurer to pay you if you have an accident. But, with the skill of attorneys to make even the simplest thing seem complicated, understanding the average insurance policy has become a challenge. To help, here’s an overview of the different types of policy.

1. Liability policy

The majority of US states operate on the basis of the law of tort. This means the person at fault in an accident pays to repair the vehicles damaged and for any medical treatment. Thus, insurance companies cover this liability to third parties. In all but three US states, it’s mandatory to carry a minimum amount of insurance to cover basic losses. The effect is the same in the twelve US states operating a no-fault system. It’s still mandatory for people to carry basic insurance coverage.

2. Collision policy

As the name suggests, this pays for the repair of your own vehicle when it’s damaged in a collision. When you own an old vehicle, it may not be worth carrying this coverage. It’s usually better to throw the wreckage away and buy something else old. But when you borrow money to buy something new or more expensive, the lender usually insists you carry collision coverage so that there’s always some security should you default on the repayments.

3. Comprehensive policy

This covers all the other situations in which you might damage or lose your vehicle, e.g. it’s vandalized or hit by a tornado.

4. Medical expenses

In some states it’s now mandatory to carry coverage against the cost of treating the injuries you receive in an accident. This reflects the realities that the cost of hospital treatment has been rising faster than inflation for many years, and that an increasing number of people do not carry health insurance.

5. Gap coverage and other policy types

When you borrow money to buy a vehicle, there can be a gap between the amount you owe on the loan and the value you will receive from the insurer should your vehicle be totaled. It only costs a few dollars to bridge the gap. Then come all the miscellaneous ways in which you might lose money. For example you can insure against the cost of towing your vehicle to the repair shop and hiring a replacement vehicle while your’s is off the road. It’s up to you to decide what is necessary and what you can afford.