If you drive, you need auto insurance; but there are many types of policies from which you can choose. Some coverage is required by law, but your lender may also require coverage. If you would like to know more, check out these four types of auto insurance coverage you may need.
1. Liability Coverage
Most states require all drivers to purchase and maintain liability coverage. Liability coverage pays for the other driver's medical bills and property damage in the event you cause an accident. This coverage does not cover your injuries or damages.
New Hampshire or Virginia do not require drivers to purchase auto insurance, including liability coverage. However, if you cause an accident, you are still responsible for damages and injuries. If you are unable to pay, your license and registration will likely be suspended.
2. Collision Coverage
Collision coverage pays for damages to your car in the event you cause an accident, including accidents only involving you. Collision coverage does not pay for your medical bills. If you want your medical bills covered, ask your insurance provider about medical payments coverage.
Some lenders require collision coverage while you pay off the loan. Once you fully own the vehicle, you can cancel your collision coverage.
3. Comprehensive Coverage
Sometimes, cars experience damage unrelated to collisions. For example, hail, fire, vandalism, and theft can all cause major damage to your vehicle, but collision coverage won't protect you. Instead, ask about comprehensive coverage. As with collision coverage, your lender may require this type of coverage while you repay the loan.
4. Gap Insurance
You've probably heard that as soon as you drive a car off the lot, it drops in value. Unfortunately, this is largely true because of depreciation. New vehicles depreciate faster than used vehicles, so if you purchase a new vehicle, you may need gap insurance.
If you purchase a new vehicle, drive it for a year, and then total it, your collision or comprehensive coverage policy pays for the current value of the car. However, thanks to depreciation, the current value of the car may be significantly lower than what you still owe, making it hard to replace your vehicle. Gap insurance provides money to close that gap, so you can actually pay off the loan.
The exact type of policy you need depends on many factors, but for the most part, you need liability coverage to legally drive. If you still owe money on a car, collision and comprehensive insurance are also a great addition. If you would like to know more, contact an insurance carrier in your area today.
Share29 March 2022
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