You can choose from many car insurance types as a car owner. With each type, you get your car covered against different possible risks of loss. Since these car insurance types cover different potential risks of loss, they are provided differently by insurance companies. Below are the major types of insurance you can take for your car:
Car Insurance Types
1. Comprehensive cover
This is a full insurance cover for your car. It covers potential risks of loss beyond accidents. This type of coverage ensures that you do not have to worry when your car has been damaged, not only from accidents but from other risks beyond your fault.
Example
You attend an event and leave your car in the parking lot. Kids get attracted by your car, and they seriously scratch your car out of mere play. You can file a claim under comprehensive cover, and your insurer will pay for new paintwork.
Comprehensive insurance is majorly taken by car owners who feel their cars are worth a fortune. It would cost them a fortune to repair their cars after they have been damaged.
At times, your car could be exposed to risks of theft or vandalism. In such cases, it would be expensive to start repairing a vandalized car or replacing a stolen one altogether.
Comprehensive insurance is the best you can take for peace of mind regardless of what damaged your car.
2. Third party
As the name postulates, this only covers third parties in cases where your car was involved in an accident. Generally, third-party insurance covers are cheaper than compressive. After all, they do not cover so many risks of loss that your car could be exposed to.
You will likely find this type of insurance with car owners confident they can manage car replacement or repair from their pocket. They feel they do not need comprehensive insurance to chip in in case of accidents or repairs.
Such car owners, however, do not want to be liable to compensate a third party when their car results in injuries or losses to a third party.
Third-party insurance also covers you under a personal accident cover if your car gets into an accident. Thus, your insurer will compensate the third party and you personally if you sustain injuries.
3. Collision coverage
This is often sold alongside comprehensive insurance. It is meant to compensate you for car damages when your car was involved in an accident. This type of car insurance pays you even without considering whether you are responsible for the accident.
Car owners who are generally cautious with their car’s safety often buy collision coverage. Since they want to avoid experiencing lengthy claim investigations to ascertain who was responsible for an accident, it suits them perfectly.
4. Liability insurance
This type of car insurance protects your finances if you are responsible for an accident. This car insurance pays for a third party’s claim against your car. It happens when you are driving your car and damaging other people’s property or causing injuries.
What is the difference between liability insurance and third-party insurance?
The main difference between the two is the personal protection cover. Third-party insurance comes with the car owner’s personal accident cover. On the other hand, liability insurance only covers your legal liability to a third party. Personal accident cover is not included in liability car insurance.
5. Personal injury protection
This type of car insurance is meant to protect the life of the car owner and the welfare of their family. It covers the medical bills and expenses related to injuries after an accident.
For example, one could get involved in a car accident and sustain a broken hand. This car insurance will help cover the medical bills one is bound to pay.
Personal injury protection is also considerate of the welfare of the car owner’s family. For instance, one could sustain serious injuries requiring months to heal. During these months, one will not likely be working hence lost income. Personal injury protection cover may reimburse such a person, ensuring they can meet family expenses.
6. Gap Insurance
This insurance applies to car owners who bought their cars under loan financing. It is effective when the car owner is still repaying the remaining balance on their car.
Gap insurance exists to factor in the depreciation of cars. When you buy a car, its value depreciates as soon you drive it away from the dealership. Months later, your car could get into an accident before full loan balance repayment.
Since cars bought on loan typically have comprehensive insurance, it will only pay up to their actual value, factoring in the depreciation. The gap between the loan balance and the wholesale value paid by compressive insurance is financed by gap insurance.
Example:
You bought a car on loan for $60,000. A few months later, a tree falls onto your car and is totalled. At this time, you had only paid off $20,000. On evaluation, your car had depreciated, and by the time of the accident, it was worth $30,000. The Comprehensive insurance will cater for this value, less deductibles. The $10,000 depreciation not paid by comprehensive insurance is now paid by gap insurance.
7. Underinsured and uninsured coverage
This type of car insurance covers you when you are a third party in case of an accident. In some cases, other people can hit your car and damage it. Automatically, repairs should be paid off by their third party’s insurance.
What happens if someone who hit your car is uninsured or underinsured?
Well, this is where underinsured and uninsured coverages come in. Underinsured and uninsured coverage helps you claim compensation for car repairs if someone who hit your car cannot fully cover the repair bills.
