Different type of car insurance policy

Six different types of car insurance Coverage to protect against losses

Last Updated on December 4, 2023 by admin

Car insurance coverage is a crucial aspect of owning and driving a vehicle. Accidents, thefts, and other unforeseen events can lead to significant financial losses if one is not adequately protected.

Understanding the various types of car insurance coverage available is essential to ensure that you are adequately protected against potential risks. There are six main types of car insurance coverage designed to safeguard you from different types of losses.

The first type is liability coverage, which provides financial protection if you are held responsible for causing injury or damage to someone else’s property.

Secondly, collision coverage covers the cost of repairing or replacing your vehicle in case it is damaged due to an accident with another vehicle or object. Comprehensive coverage protects against non-collision incidents such as theft, vandalism, fire, or natural disasters.

Personal injury protection (PIP) covers medical expenses for injuries sustained in an accident regardless of who was at fault.

Uninsured/underinsured motorist coverage steps in when the at-fault party does not have adequate insurance.

This article will provide the different type of insurance policy car owners should get to protect against losses when they get involved in accident and theft.

You can also read: List of Banks in Nigeria that offer easy-to-get Auto loans

1. Third party insurance

The automobile insurance known as Third party offers coverage against claims of damages and losses incurred by a driver who is not the insured, it just covers injuries or damage to third parties

This liability insurance purchased by an insured from an insurer for protection against the claims of another (third party).

2. Comprehensive Coverage insurance

When it comes to safeguarding against unforeseen events that may damage or compromise your vehicle, comprehensive insurance is a vital coverage option. Unlike collision insurance, which only covers damages resulting from accidents with other vehicles, comprehensive insurance provides protection against a wide range of losses.

Comprehensive insurance is designed to shield your car from non-collision incidents such as theft, vandalism, natural disasters, falling objects, fire, and animal collisions.

It offers financial support to repair or replace your vehicle in case of damage caused by these events. In addition to covering the cost of repairs or replacement for damages incurred outside of accidents with other vehicles, comprehensive insurance also provides coverage for stolen vehicles. If your car is stolen and not recovered within a certain time frame determined by your policy terms, comprehensive insurance can help compensate you for the loss.

While collision insurance focuses on repairing or replacing your car after an accident with another vehicle occurs, comprehensive coverage goes beyond those scenarios. It ensures that you are protected against various unexpected incidents that could result in substantial financial burdens if not adequately insured against.

 

Also read: Common Life Insurance Policy Terms, definition and Types

3. Collision insurance

One of the essential types of car insurance coverage that helps protect against losses is collision coverage. This particular policy provides financial assistance for repairing or replacing your vehicle if it sustains damage in a collision, regardless of who is at fault.

Collision coverage is especially beneficial for individuals who own newer or more expensive vehicles. In the event of an accident, this policy ensures that you won’t have to bear the full burden of repair costs out of pocket.

Whether your car collides with another vehicle, hits a stationary object like a tree or pole, or rolls over, collision coverage will step in to cover the damages.

However, it’s important to note that collision coverage typically comes with a deductible – an amount you must pay before your insurance kicks in. The deductible can vary based on your policy and preferences; choosing a higher deductible usually results in lower premiums but means you’ll have to pay more upfront if an accident occurs.

Read: Things consider before applying for a Car loan

4. Personal Injury Protection And Gap Insurance

When it comes to protecting yourself and your vehicle from unforeseen circumstances, there are additional coverage options beyond the standard car insurance policies.

Two of these options are Personal Injury Protection (PIP) and Gap Insurance, which provide vital protection against losses. Personal Injury Protection (PIP) is an optional coverage that provides medical expense coverage for injuries sustained in a car accident, regardless of who is at fault.

It can cover medical bills, lost wages, and even funeral expenses. PIP is especially beneficial for those without health insurance or with limited coverage since it ensures that medical expenses are taken care of in case of an accident.

Gap Insurance is another essential option to consider. It covers the difference between what you owe on your car loan or lease and the actual cash value of your vehicle if it gets totaled or stolen.

This means that if your car’s value depreciates faster than you can pay off your loan or lease, Gap Insurance will bridge the gap, preventing you from being financially burdened.

5. Underinsured/Uninsured Motorist Coverage

While car insurance is a legal requirement in most states, not all drivers comply with this obligation. Uninsured/Underinsured Motorist (UM/UIM) coverage steps in to protect you when involved in an accident caused by a driver who lacks insurance or carries insufficient coverage.

This type of coverage ensures that you are not left financially vulnerable due to someone else’s negligence. In the event of an accident, UM/UIM coverage helps cover medical expenses, lost wages, and property damage caused by an uninsured or underinsured driver.

Without this protection, you may be left responsible for these costs out of your own pocket. UM/UIM also extends its benefits to hit-and-run incidents where the offending driver cannot be identified.

Moreover, UM/UIM coverage is particularly valuable if you live in an area with a high number of uninsured drivers or if your vehicle is parked on the street where it’s more susceptible to accidents caused by uninsured motorists.

 

6. Liability insurance coverage

Liability insurance is a vital component of car insurance coverage, providing financial protection in the event that you cause an accident resulting in injury to others or damage to their property.

This type of coverage is typically required by law in most states, ensuring that drivers can take responsibility for their actions. Liability insurance consists of two main components: bodily injury liability and property damage liability.

Bodily injury liability covers medical expenses, lost wages, and legal fees for individuals injured as a result of your actions. Property damage liability, on the other hand, covers the cost of repairing or replacing damaged property belonging to others.

The limits of liability coverage are usually expressed as three numbers (e.g., 100/300/50), representing the maximum amount the insurance company will pay for bodily injury per person, bodily injury per accident, and property damage per accident respectively.

It’s important to select appropriate coverage limits based on your assets and potential risks. While liability insurance protects you financially against losses caused by your actions, it does not cover your own injuries or damages to your vehicle.

Also read: 6 Different Types of Mortgage Loans you need to understand

Your liability coverage won’t pay to repair your vehicle or for injuries that you sustained.There are separate coverages available for these exposures, including collision coverage, comprehensive coverage, and medical payments coverage as explained above.

Meet Ogbeide Frank, popularly known as perere, a blogger who loves writing about finance and Tech. He studied Business administration at the Ambrose Alli University Ekpoma and Mobile Communication at Orange College Malaysia .Frank have worked as a banker and consultant in variety of Nigeria agencies

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