Auto Insurance: Coverage Options And How Each Coverage Options Can Protect You

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Learn about auto insurance coverage options and how each coverage options such as bodily injury, uninsured motorist and collision coverage can protect you.

 Uninsured Motorist Coverage

The term “Uninsured Motorist Coverage” may be defined as an automobile policy option which covers for property damage and bodily injury caused by another motorist who does not carry liability insurance. An ‘uninsured motorist’ is one without proper insurance or underinsurance who does not have the insurance that meets state-required minimum liability amounts or whose concerned insurer is unable or unwilling to pay the claimed amount due to some deficiency. A good example of such uninsured motorist is a ‘Hit-and Run Motorist’. A person holding a regular insurance policy, without this coverage, will not be able to recover his claim when he gets involved in an accident where the other party is at fault and uninsured.

Thus, ‘uninsured motorist coverage’ helps to protect you with medical expenses and costs associated with repairing damage cars. It also covers victim’s and other passengers in the vehicle’s medical expenses, other injury related expenses, in certain cases of damage to property and lost wages where the other driver was not insured. We should remember one point very distinctly—this coverage applies only if the other party is uninsured and found to be guilty over the incidence of accident.

Full Coverage Auto Insurance

In reality, there is no such insurance policy as “Full Coverage Auto Insurance”. No insurance company should advertise full coverage, because it is impossible to buy a car insurance policy where you are fully covered against every exposure or peril. There are lots of auto insurance options you can choose from to help you feel well protected. If one asks for full coverage, he usually means a specific set of coverage (comprehensive, collision and liability) in own personalized way to indemnify himself adequately with insurance. Comprehensive and collision insurances help you to repair damages or total replacement of your car while liability insurance gives you protection from damages you caused in an at-fault accident. ‘Full coverage auto insurance’ is a robust package of protection although it might not provide you all the protection you need. That is why ‘Full coverage auto insurance’ is often considered as a misleading term—it is actually nothing more than a ‘very good coverage’ and it never means that you won’t have to pay anything out of pocket after an accident,  you are never covered for everything in an insurance policy. It really means the cover as much as you can comfortably afford. You can buy ‘as the package is’ or can create own through ‘a la carte’ pricing.

Full coverage auto insurance’ generally includes:

(a)      State-required liability or no-fault insurance coverage to cover property damages and bodily injury to others in an accident you cause.

(b)     Collision coverage to pay for damages to your car; and

(c)      Comprehensive coverage to cover damages to your car caused by something other than a collision, such as, vandalism, theft, hail or flood or to pay for damages caused by hitting an animal. It includes the charges paid for rented vehicle if your vehicle is stolen.


What Is Collision Coverage

“Collision Coverage” in an insurance policy protects from damage of an actual collision sustained in the automobile of an insured even due to the fault of the insured driver. It covers damage to an insured car in a variety of situationsbut excludes damage due to theft, vandalism or damage that is paid from another driver’s policy when the other driver was at fault. This type of cover is often added as an optional extension of a basic policy of insurance. However, sometimes it becomes mandatory when you have a loan on the vehicle. Collision coverage usually covers accidents like overturn, hitting another car or hitting a stationary object, like a bridge or a tree. It helps the driver to recuperate costs associated with damage caused to their car during an accidentirrespective of the fact that who is at fault for the accident. Whether the accident was your fault, or the fault of another driver, it ensures you have necessary fund for damage repair. Depending on the insurance carrier and the amount of coverage desired, the collision coverage may include some deductibles subject to the conditions of the vehicle. An older vehicle has a higher deductible than a new one.

In simple words, a property damage liability policy does not cover your vehicle in any way; it only covers the things that you hit. For damages to your vehicle on account of an accident, collision coverage auto policy is needed.

Gap Coverage

Gap insurance covers the “gap” between the amount of money you owe on your car loan and what your insurance company will pay out in the event of a total loss due to an accident or theft. It is also known as Guaranteed Auto Protection or Guaranteed Asset Protection (GAP). GAP Coverage is needed by auto financing companies for both used and new small and large vehicles and heavy trucks. Some leasing contracts also need GAP coverage. If a loss occurs the GAP insurer will pay the difference between the residual value and the amount of loans outstanding to your financier.

If your vehicle has been totaled by covering peril with other insurances (like comprehensive, collision and liability), in he event of an accident or theft, your insurance company will settle your claim by paying the amount up to the actual or realizable cash value for your car.  The amount is often found considerably less than your outstanding amount you still owe on your car loan to your financier. This financial shortfall is covered under GAP Coverage.

Gap insurance does not cover:

  • Installments due on outstanding balance due to job loss, financial hardship, disability or death
  • Amount due on a repossessed car
  • Any car rental charges, if your car is in a repair shop
  • Any loan carry over balances
  • Down payment for a new car
  • Cost of extended warranties added on your car loan


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