This is probably the most important type of car insurance, and it's required by our state auto insurance laws. Liability car insurance protects you against the cost of damage and injury that you cause to another in an automobile accident.
It's actually made up of two different policies, bodily injury liability, and property damage liability. As you might guess, bodily injury insurance protects you from the cost of personal injury to others, and property damage insurance protects you from the cost of damage you cause to any physical property.
You've probably seen automobile policies described by three numbers (like 25/50/10). These numbers refer to auto liability insurance.
They're usually called the split limits of liability insurance. Under our example auto liability insurance policy, you'd be covered for up to:
$25,000 worth of bodily injury caused to another person $50,000 for bodily injuries caused to everyone $10,000 worth of property damage.
Uninsured Motorist Insurance:
This type of insurance protects you against injury caused in an automobile accident where the at-fault driver has no liability car insurance coverage.
Uninsured motorist insurance is needed when the other driver has no liability coverage.
Collision Insurance:
Collision insurance coverage pays for damage caused to your vehicle in an automobile accident, when you are "at fault". A standard collision automobile insurance policy will pay for any repairs up to the fair market value of your car.
It is important to remember that this value can be significantly lower than the cost of replacing your vehicle (or your loan balance.) If your car is financed or leased, you will need gap insurance to reimburse you for the difference between what you owe and what the car is worth.
Collision coverage usually also comes with an insurance deductible. It's the amount of money you pay toward repairs before your collision insurance kicks in. The higher the deductible you're willing to pay, the less the collision policy will cost.
Collision insurance coverage is not required by law. However, if you're driving a car purchased from a dealership or financed through a lender, you will be required by the dealership or lender to carry collision insurance.
Comprehensive Automobile Insurance:
Comprehensive is very similar to collision insurance, the main difference being that comprehensive covers damage caused to your vehicle caused by any unknown party or "act of God".
Vandalism, flood, hurricane, theft, and fire are all events usually covered by comprehensive automobile insurance. (But make sure to read your comprehensive insurance policy for exact coverage details.)
Like collision automobile insurance, comprehensive coverage will pay up to the fair market value of your car (less your insurance deductible.) And although it's not legally required, you will probably need it if your car is financed.
