Car insurance is a legal requirement in most places, but understanding what it actually covers can be confusing. Policies vary depending on the provider and the level of coverage you choose. This guide breaks down the different types of car insurance coverage so you can make an informed decision.
1. Liability Insurance
What it covers:
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Bodily Injury Liability (BIL): Pays for medical expenses, lost wages, and legal fees if you injure someone in an accident.
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Property Damage Liability (PDL): Covers repairs or replacement costs if you damage someone else’s property (e.g., their car, fence, or building).
What it doesn’t cover: Your own injuries or vehicle damage.
2. Collision Coverage
What it covers:
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Repairs or replacement of your car if you collide with another vehicle or object (e.g., a tree or guardrail).
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Applies regardless of who is at fault.
What it doesn’t cover: Damage from non-collision events (e.g., theft or weather).
3. Comprehensive Coverage
What it covers:
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Non-collision-related damage, such as theft, vandalism, fire, hail, floods, or hitting an animal.
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Broken windshields (in some policies).
What it doesn’t cover: Collision-related damage (handled by collision coverage).
4. Personal Injury Protection (PIP) / Medical Payments (MedPay)
What it covers:
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Medical expenses for you and your passengers, regardless of fault.
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May cover lost wages or funeral costs (depending on the policy).
What it doesn’t cover: Damage to your vehicle or other property.
5. Uninsured/Underinsured Motorist Coverage (UM/UIM)
What it covers:
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Medical bills and vehicle repairs if you’re hit by a driver with no insurance or insufficient coverage.
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Hit-and-run accidents (in some states).
What it doesn’t cover: Damage from an insured at-fault driver.
6. Gap Insurance
What it covers:
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The difference between your car’s actual cash value and the remaining loan balance if your car is totaled.
What it doesn’t cover: Regular repairs or maintenance.
7. Rental Reimbursement & Towing Coverage
What it covers:
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Rental car costs while your vehicle is being repaired after a covered claim.
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Towing and labor fees (e.g., jump-starts or lockout services).
What it doesn’t cover: Routine maintenance or non-covered incidents.
Final Thoughts
Car insurance policies can be customized based on your needs and budget. While minimum liability coverage is legally required, adding collision, comprehensive, or UM/UIM can provide extra protection. Always review your policy details and consult your insurer to ensure you have the right coverage.
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