Understanding Auto Insurance: Types of Coverage

Everybody knows if you drive a car, you must also have car insurance—the government requires it. But getting insured is the only way to protect yourself, your car, and all other drivers and vehicles on the road.

When you sign up for auto insurance, you will have many options to choose from. It may be overwhelming. Not only will you need to compare different insurance companies; you'll need to compare different types of insurance, too.

There are four basic kinds of insurance policies you can pick from, regardless which insurance company you're working with. Once you understand your auto insurance options, you can easily navigate both the world of auto insurance and your local roads as a confident, insured driver.

Comprehensive Coverage

If you're willing to pay a little more, you should definitely consider buying comprehensive insurance for your car. If your car is lender-financed, you may already be required to purchase comprehensive coverage to cover your lender's investment.

Expectedly, all medical costs and costs of vehicle damage that result from an accident or driving “mishap” are completely covered. With coverage like this, your car is typically protected, even from bad weather like hailstorms, wind damage and all sorts of other threats.

A major advantage of this type of coverage is that, no matter what happens, you're fully insured. If an uninsured driver rear-ends you at a stoplight, your insurance company will take care of it, regardless who's at fault—even if he or she does not have insurance to cover the costs of personal injury and/or damage to your vehicle.

However, there are always exceptions, so be careful! Every insurance policy has a few caveats, so get familiar with your policy's limits. Check to see if it insures you 100 percent. You don't want to find out—too late—that it doesn't!

Third-Party Coverage

Third-party coverage is a common choice among drivers who don't hold loans on their cars, and thus aren't required to buy full coverage, yet still want a decent policy.

There are two types of third party coverage. The first includes fire and theft, just like comprehensive insurance; the second does not.

With the first type of third-party coverage, the insurance company is only obligated to cover the cost of damages or personal injury if you were at fault in an accident involving a third party. If you were not at fault, you won't be covered by your insurer but by the insurance of the person who was at fault instead.

Similarly, if you damage your car in an accident that does not involve a third-party (perhaps you slammed into a pole), your insurance company may not cover the damage.

The second type of third party coverage is perfect if your car is old and of little value. It's low-level coverage at a cheap price, and something you might want to consider if you just want the basics.

Classic Car Coverage

If you own a vehicle that's been around the block a few times—say, for example, it's 30 years old—you ought to investigate your options for a more specialized type of coverage. There are varying requirements for this kind of policy, so carefully compare all the car insurance quotes from companies that offer it.

It's important to thoroughly shop around for this type of insurance policy, as it will not only affect your pocketbook on a monthly basis, but can have serious, financial consequences later on down the road.

Car Insurance on a Budget

Here at GIQ, we’re committed to helping you find health, home, auto and life insurance that fit your needs—and your budget. So give us a try today for cheap insurance quotes. You might be surprised how much you can save!