Auto insurance comes with a lot of benefits. It prepares you for unforeseen future occurrences like damage to a car or payment for damaging someone else’s car or property.
There are various kinds of auto insurance policies and plans. To decide on picking an insurance coverage plan that suits what you need, you’ll have to understand the different types of insurance coverage plans that are mandatory depending on your coverage payment and your needs.
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Whether it’s an already bought car or taken on lease, you will be required to have insurance coverage for your vehicle. Auto insurance coverage can be divided into three forms:
A. The mandatory or compulsory insurance coverage
As the name implies, mandatory coverage means it is required that you get these insurance plans. The compulsory insurance coverage includes:
1. Bodily injury liability coverage:
This covers costs and expenses if you cause an accident to happen. This form of insurance is mandatory and covers expenses due to short and long-term injuries from the accident, funeral costs if someone dies, covers for legal fees if the other party involved wants to sue you, and covers medical expenses.
2. Property damage liability coverage:
This helps to pay for damage to other people’s cars or property. Coverage limits are displayed in this format- 150/200/40. The first number is multiplied by a thousand, and it indicates how much the insurance company covers per person for bodily injuries. The second number is also multiplied by a thousand. It means the maximum amount that can be spent in an accident, while the third number is concerning property damage.
B. Mandatory or optional insurance coverage
1. Uninsured and underinsured motorist insurance coverage:
If you get into an accident with a driver that doesn’t have adequate auto insurance coverage. This form of insurance can be required or optional, depending on your location or state.
2. Medical payments coverage:
This only covers injuries sustainable by yourself and your passengers or other people in the car at the time of the accident.
3. Personal Injury Protection:
This is similar to medical payments coverage and compensates for income loss for you and your passengers if injuries inflicted affect your source of income.
C. Optional insurance coverage
1. Collision coverage
This insurance is optional, and it covers the expenses associated with the damage to your car when you collide with other objects. This insurance is necessary in case the vehicle is on a lease or loan to you
2. Comprehensive insurance coverage:
This encompasses damage coverage due to natural causes such as flooding, earthquake, theft, and falling objects.
3. Windshield or glassware coverage
This coverage is particularly beneficial when there’s a break in one of the auto glassware components.
D. Guaranteed asset protection insurance
This only applies to people whose cars were gotten at a lease or an auto loan. Usually, if your car gets damaged, insurance pays you back the amount for the car’s current value. This can be a disadvantage for people who take cars on leases and are expected to pay back the car’s principal amount at the time of collection. Guaranteed asset protection insurance covers the gap between the initial amount to be paid and the car’s depreciated value.
In summary, auto insurance coverage is essential, and your choice of coverage plan depends on your needs, what is required by law, and your financial capabilities.