What Types Of Car Insurance Are There?

Most countries require by law that you have car insurance, but even if you are not required to have it, the risk of being uninsured is too great of a risk to ignore considering all the things that could happen to you on the road.

For example, if you were involved in a car accident where you caused damage to another vehicle, someone’s property, or even to another person, then you will have to pay for the damages that you caused.

This could turn out to be quite an expensive ordeal, especially if medical bills are involved or an automobile has been badly damaged. To make matters worse, a person may even choose to take legal action against you, resulting in you have to pay for legal fees to defend yourself or to prosecute another driver.

Put quite simply, driving on the road is very risky business, but it is usually not something that most car owners tend to think about until they have an accident and there are financial costs involved.

Without adequately insuring yourself against such risks, you could put yourself into a very difficult financial situation and one that you struggle to get out of by yourself. It could even result in you losing a significant portion of your savings, which could then have disastrous consequences if you have a family to support.

This is precisely why governments require motorists to have vehicle insurance, because overall it helps to make things better for everyone by giving all people a reasonably equal chance of recovering from mishaps on the road without them having to take too much of a financial hit.

Of course, not everyone likes to have car insurance, because most people think that it is something they will never benefit from, and essentially, by insuring their vehicle, they think that they are wasting their money.

Whilst it is true that only a small percentage of road users do become involved in a road or traffic accident, you can’t exactly predict if you will be one of those unlucky few. As a result, like with most types of insurance, car insurance is designed to protect everyone from a significant financial risk, no matter how small that risk may actually be.

What Types Of Vehicle Insurance Can You Get?

There are different types of car insurance, but the one that is usually required by law is liability coverage. Liability coverage can cover both bodily injury and property damage during an automobile accident.

It is important to note however, that there are actually many different types of vehicle insurance that you can get to protect yourself from certain types of risks when driving on the road.

Most people though, will start off with a basic level of coverage, such as PIP/PD (personal injury protection and property damage), that protects them from some of the main risks they are likely to face. Basic coverages are usually a good starting point for new or young drivers, as they help to protect you financially at a price you will be able to afford.

For those who feel that they face greater risk on the road, such as high income earners who fear that they may be sued by other motorists for large amounts due to their high salary, there are other types of vehicle insurance coverage policies that will provide greater protection.

One downside to this added coverage however, is that it is going to cost you more to maintain that policy. This is why with any type of insurance, it is recommended that you start with the basic coverage plans first, and then gradually increase the level of coverage you receive slowly over time or as you can afford to do so.

Ideally, this is something that you should talk to your insurance agent about, as they will be able to help you determine the correct level of coverage for your current income or budget.

Below we will look at some of the main types of vehicle insurance that are worth taking out, as each of them could one day save you a lot of money if you are ever involved in an accident. These are:

• Bodily injury liability coverage.
• Property damage liability coverage.
• Collision insurance.
• Comprehensive car insurance.
• Uninsured motorist coverage.
• Young driver car insurance.

The following video provides some general advice on taking out auto insurance.

Bodily Injury Liability Coverage

Bodily injury liability coverage protects you against lawsuits should someone get injured in an accident that you were involved in.

As well as legal fees, this type of insurance will also protect against medical expenses as a result of another driver needing to visit a doctor or go to the hospital after a road accident.

Be sure that your liability coverage offers you full coverage, as some policies will only offer you a minimum amount. What this means is that if you are sued, your insurer pays out a small amount and then you pay the rest of the cost yourself. Depending on the type of accident you were involved in, and the amount of damage that was done, this could work out to be a very significant amount of money which is taken directly out of your own pocket.

If cost is an issue, then you may have to go for a partial coverage plan, as full coverage car insurance is usually more expensive. However, considering the extra protection you get, this added expense is usually worth paying and it normally isn’t that much extra anyway.

An important point to remember though, is that if you lend your car out to anyone, then your insurance will still apply to your vehicle and so you will be held liable under your policy agreement should that person be involved in an accident.

In other words, if you lent out your vehicle to a reckless driver and they crash into another motorist, you will have to pay for the damages and not them. So be very careful as to who you lend your car out to!

Property Damage Liability Coverage

Property damage liability coverage will cover any damage you cause to other cars or property in the event of an accident.

If you did not have property damage cover and you were involved in a serious accident, you could easily land up with a bill for thousands of dollars, so this is definitely something worth having.

If you currently have a loan on your car, then you will also need some form of collision insurance and comprehensive car insurance.

What Is Collision Insurance?

Car collision insurance coverage will pay you for any damage to your car that occurs during an accident, or if your car is completely destroyed it will pay for a replacement car.

This is definitely a good type of car insurance to have as it protects you against a potentially very expensive loss. However, by paying a little bit extra, you can get much more protection with comprehensive car insurance.

What Is Comprehensive Car Insurance?

Comprehensive car insurance coverage is designed to give you total protection by providing insurance coverage against theft and damages caused during natural disasters. Basically, this will cover you against any sort of damage to your vehicle that has not been caused by a collision.

The large majority of people on the road would benefit the most from having collision & comprehensive car insurance combined coverage, as this is probably the best level of protection that you can get for the money.

Uninsured Motorist Coverage

In the event that you get hit by someone who doesn’t have auto insurance, you will need uninsured motorist coverage to cover any expenses that come as a result of that accident simply because the uninsured driver has no insurance policy to pay for any damages they caused you.

This will cover things such as medical expenses or lost wages should you be unable to work after the accident.

Whether or not you take out this type of vehicle insurance really is up to you. Yes, it can potentially be a very disastrous situation to be in if you are involved in a road accident with an uninsured motorist, but at the same time the risk of this happening is fairly low as most drivers do have their vehicles insured.

Of course, if you would like that added piece of mind then by all means take out uninsured motorist coverage, but if you don’t have it, you shouldn’t worry about it too much.

Insuring Teenage Drivers

If you are a young driver you can expect to pay higher car insurance rates, as from the insurance company’s perspective, you are classed as a high risk driver.

Basically, this means that they think you are more likely to have an accident than other groups of people, and as a result, they charge you higher premiums.

Unfortunately, road accident statistics prove this to be true, and it is these very same statistics that insurance companies use to determine how much to charge people for certain types of coverage. In general, these statistics can be summarized by stating that most road accidents occur with teenagers and young adults, but older adults have higher accident rates per mile driven.

The good news is that if you don’t have an accident during your first few years of driving, then your insurance premiums will go down.

Generally, you will find that the longer you have been driving without incident, the lower your rates will be. Conversely, should you have an accident in your car, then you can expect your rates to go up for a few years.

So try to drive sensibly and safely, as otherwise you could end up needlessly paying high car insurance premiums for many years.