For almost every adult car insurance in the US is an intrinsic part of their lives, and this is because almost every adult wants to own and drive a car in the US. So the car is important and desirable because it provided financial protection in the event of an accident or server/minimal damage to your car/vehicle.
If you are looking for detailed information on the various types of Car insurance in the US, then this article is all you will need, because we’ll delve into the various types of car insurance which are available in the US – We will define them, state their importance and also give you a brief history of car insurance in the US.
Definition Of Car Insurance
Car insurance is a contract and agreement between your insurance provider/company and yourself that protects you financially in the eventuality of the theft of the vehicle or an accident. In exchange for a monthly or yearly premium, your chosen insurance provider will take care of some or all the financial costs that will accrue from the damages to the car or injuries you sustained during the accident.
There are different types of car insurance in the US, each with its own unique set of coverages (on the side of the insurance company) and requirements (on your side). Let us take a closer look at all of these aspects of car insurance.
Brief History of Car Insurance in the US
Car insurance has been used to protect car owners in the United States in some form or another since the early 1900s. The pioneering policies were set out to protect car owners from liability in the event of a car crash (accident).
As time went on, car insurance evolved to include coverage for personal injury and property damage to car owners. A ‘No fault’ insurance was introduced for car owners in the 1950s, and it allowed them to demand and receive financial protection from their insurance company no matter who was at fault in the accident.
The car insurance business in the US today has grown to become a multi-billion-dollar industry, with tens and dozens of companies offering a variety of coverage options and packages for car owners.
Types Of Car Insurance In The US
The interesting fact about Car insurance in the US is that there is basically a class of car insurance that is unique to every type of person and income class in the country. They are:
Liability Insurance
This is the type of insurance that covers and pays for damages and injuries you cause to other drivers, passengers, and road users in an accident. It is required of you by law in most states in the United States of America.
Collision Insurance
This type of car insurance covers and pays for the damages to your own vehicle when an accident takes place, regardless of whose fault it was.
Comprehensive Insurance
The ‘Comprehensive insurance’ is a unique type of car insurance that pays for and covers the damages to your vehicle that were not caused by an accident. This covers issues such as car theft, car vandalism, or damages related to bad weather.
Personal Injury Protection (PIP)
This class of car insurance pays for and covers the medical expenses and lost wages for you and your passengers when an accident takes place, regardless of whose fault it was.
Uninsured/Underinsured Motorist Coverage
This type of car insurance covers you in the event that you have an accident with a person who doesn’t have car insurance or doesn’t have enough insurance to cover the damages on your car or for injuries you sustained.
Gap Insurance
The Gap insurance pays for and covers the difference between what you owe on your car and the actual cash value of the car in the event that the car is lost.
Advantages And Disadvantages Of The Various Types Of Car Insurance In The US
Liability Insurance
Advantages
- Provides coverage for the injuries and damages you cause to other people in an accident.
- It is required by law in most states in the US.
- It has lower premiums compared to other types of car insurance.
Disadvantages
- It does not protect you from damages to your own car/vehicle or even injuries you sustain during an accident.
- The minimum coverage requirements may not be enough to pay for all of the damages if you get involved in a serious accident.
- If you are faulted for the accident, you could be liable to pay for damages that exceed your coverage limits.
Collision Insurance
Advantages
- It covers and pays for the damages to your own vehicle in a case where an accident took place, regardless of whose fault it was.
- It gives you peace of mind knowing that you won’t have to face costly repair bills.
Disadvantages
- It costs higher premiums when compared to liability insurance.
- It might not be adequate to pay for the full cost of repairs and replacements of your car/vehicle.
- It is only available and carters for collision-related damages, and no other types of damages or theft.
Comprehensive Insurance
Advantages
- Just like the title, it covers damages to your car/vehicle that are not as a result of an accident, such as theft, vandalism, or damage caused by bad weather.
- This also provides peace of mind with the knowledge that you are covered for a wide range of potential damages.
Disadvantages
- Costs higher premiums when compared to liability or collision insurance.
- May most likely not cover the complete cost of repairs or replacements of your damaged vehicle.
- Only covers damages that are not caused by collision, not damages from accidents.
Personal Injury Protection (PIP)
Advantages
- It pays for the medical expenses and covers lost wages for you and your passengers in the case of an accident, without considering who is at fault.
- Provides peace of mind knowing that your potential medical expenses are covered.
Disadvantages
- Costs higher premiums when compared to liability insurance.
- The coverage limits may not be sufficient to pay for all the medical expenses.
- May duplicate coverage that you are already entitled to through your health insurance.
Uninsured/Underinsured Motorist Coverage
Advantages
- Gives you coverage in the event that you are involved in an accident with someone who doesn’t have an active insurance or doesn’t have enough insurance to pay for the damages.
- Provides hope and peace of mind knowing that you won’t have to worry in the event of an accident with an uninsured or underinsured driver.
Disadvantages
- It costs higher premiums when compared to liability insurance.
- Coverage limits that have may not be adequate to pay for all the damages to a vehicle.
- Does not provide coverage for damages that are non-collision related.
Gap Insurance
Advantages
- It covers the difference between what you owe on your car/vehicle and its real cash value in the case of a total loss of the vehicle.
- This gives you peace of mind knowing that the loan balance will not exceed the value of the car.
Disadvantages
- It costs higher premiums when juxtaposed with other types of car insurance in the US.
- If you have enough equity in your car, this might not be necessary.
- Only pays for the difference between what you owe and the actual cash value, not the total cost of the new vehicle.
The Importance Of Car Insurance
Car insurance is important for a wide range of reasons. First and foremost, it’s required by law in most states in the United States of America.
Asides from the legal angle, car insurance in the US provides a layer of financial protection for you and your family. Life is pretty unpredictable, and accidents happen. When they happen, they can be pretty expensive, and you would not want to be on the receiving end. Without insurance, you could be in short of thousands of dollars in damages and medical bills, for something an insurance could have easily handled.
More importantly, car insurance can provide real peace of mind, with the knowledge that you are shielded from emotional trauma from financial stress in the event of an unfortunate accident.
In conclusion, car insurance is the most important aspect of having your own car and driving in the US. You will be far off in good standing if you understood the different types of car insurance and coverages, and how they can help you make an informed decision when picking an insurance policy that will best cater to your budget and needs.