Car insurance constitutes a mutual agreement between you and an insurance provider. Paying a premium removes the financial risk of operating your vehicle to the insurer. In exchange, the insurer commits to covering certain costs or liabilities resulting from accidents or other covered incidents. The fundamental aim of car insurance is to furnish financial safeguarding in case of:
- Damage to your vehicle
- Harm inflicted upon you or others in an accident
- Responsibility for damages or injuries resulting from your actions
Now, let’s explore the different types of cheap car insurance coverage and their importance:
- Liability coverage
Liability coverage is most states’ fundamental and obligatory form of car insurance. It shields you from financial responsibility if you’re deemed at fault for an accident resulting in bodily injury or property damage to another party. This coverage comprises two primary elements:
- Bodily Injury Liability – This covers the other party’s medical expenses and lost wages if you are found at fault in an accident.
- Property Damage Liability covers repairing or replacing the other party’s damaged vehicle or property.
Liability coverage is essential as it helps you avoid paying out-of-pocket for the damages and injuries you may cause to others.
- Collision coverage
Collision coverage pays for repairing or replacing your vehicle if it is damaged in a collision with another vehicle or object. This coverage is typically required if you have a car loan or lease, as the lender or leasing company wants to protect their investment in the vehicle. Collision coverage is essential if your car is relatively new or has a high value, as repairing or replacing it is substantial.
- Comprehensive coverage
Comprehensive coverage protects your vehicle against non-collision-related damages like theft, vandalism, natural disasters, or animal collisions. This coverage can be precious if you live in an area prone to natural disasters or your vehicle is parked in a high-crime area. While comprehensive coverage is not mandatory, it is often recommended, mainly if your car is relatively new or has a high value.
- Uninsured/underinsured motorist coverage
This coverage protects you if you are involved in an accident with a driver without insurance or insufficient insurance to cover the damages and injuries they have caused. In such cases, uninsured/underinsured motorist coverage pays for your medical expenses and vehicle repairs. This type of coverage is essential, as it helps you avoid financial hardship if you are involved in an accident with an uninsured or underinsured driver.
- Medical payments coverage
Personal Injury Protection (PIP) or Medical Payments coverage pays for medical expenses and lost wages for you and your passengers, regardless of who was at fault in the accident. This coverage can be particularly beneficial if you have a high-deductible health insurance plan or are concerned about your ability to pay out-of-pocket medical expenses. PIP or Medical Payments coverage is mandatory in some states, so it’s essential to check the requirements in your area.
- Roadside assistance
Roadside assistance coverage provides help if your vehicle breaks down or you experience a flat tyre, dead battery, or other mechanical issues while on the road. This coverage includes towing, jump-starts, locksmith services, and fuel delivery. While roadside assistance is not mandatory coverage, it is a valuable addition to your car insurance policy, especially if you frequently drive long distances or in remote areas.
- Gap insurance
Gap insurance is designed to cover the difference between the remaining balance on your car loan or lease and the actual cash value of your vehicle if it is totalled in an accident or stolen. This coverage is essential if you have a new car or a car loan in the long term, as the value of your vehicle can depreciate quickly, leaving you “upside down” on your loan. Gap insurance is often recommended for those who have a high loan-to-value ratio on their vehicle.
