Learn the Different Types of Auto Insurance

auto insurance form with car keys

Most of us are aware that we need auto insurance, but knowing which option to choose can be complicated. There are several different types of car insurance, each with varying degrees of coverage. Researching the types of auto insurance before you buy will ensure you have the policy that best suits your needs. 

Auto Insurance Types and Differences

Liability Insurance

In most states, liability insurance is a basic requirement in order to legally drive a car. This type of insurance covers damages to personal property and bodily injury as a result of an accident.

An important aspect of liability insurance is that it typically only covers injuries and/or damage to the party who is not at fault. In other words, if you are responsible for an accident, your liability policy will pay to repair damages to someone else’s property, but not to your own. Likewise, it may help cover medical bills for injuries to another person, but it will not cover the cost of your own injuries. 

Liability Coverage Minimums

The amount of liability coverage you need will vary depending on where you live. In Colorado, drivers are expected to obtain liability insurance with the following minimum coverage:

  • $25,000 for bodily injury or death to one person injured in an accident
  • $50,000 for bodily injury or death to all people injured in an accident 
  • $15,000 for property damage caused by the accident

Summary: liability insurance is mandatory and covers bodily harm and damages sustained by the party who was not at fault in an accident. It does not cover injuries or property damage sustained by the at-fault party. 

Collision Insurance

Unlike liability insurance, collision insurance will help cover damages to your own vehicle in the event of an accident. This can be due to a collision with another vehicle or an object (such as a guard rail); it may also cover damage to your vehicle in other events, such as a roll over accident. 

Collision insurance is not mandatory, but it is strongly recommended to avoid having to pay for damages to your car or medical bills out of pocket. 

Summary: Collision is not mandatory, but it is recommended. This type of insurance only covers damage to your own vehicle. It does not cover bodily injury or damages to another person’s property or vehicle.

Comprehensive Auto Insurance

Comprehensive auto insurance is not required by law. However, it may be a good option if you live in an area where your vehicle is more likely to be damaged by factors other than an accident. For example, if your state is prone to severe hailstorms, fire, or winds, comprehensive insurance will help pay for any resulting damage. It also may cover auto theft or vandalism. 

In Colorado, it is highly recommended that drivers purchase comprehensive auto insurance. Unfortunately, we are currently number one in the nation for auto theft. This factor (combined with our notorious storm season) means comprehensive coverage is generally a worthwhile investment. 

Summary: comprehensive auto insurance covers damages to your car both in and outside of a collision. This means damages caused by weather, vandalism, fires, etc. are eligible for coverage under a comprehensive plan. 

Additional Auto Coverage Options

In addition to the three main types of auto insurance types, there are a few other options you may consider adding to your policy:

Uninsured/Underinsured Motorist Insurance

Uninsured/Underinsured (UI/UIM) provides a safety net in the event of an accident caused by someone without auto insurance or by someone who has a bare-bones policy that does not cover enough of the damages. 

Medical Payments Coverage

Liability and comprehensive auto insurance policies may include coverage of costs like medical bills. However, liability insurance will not cover medical bills for the at-fault party, and coverage may be capped in other circumstances. Medical payments coverage can help pay for additional or unforeseen medical costs incurred by all parties involved, regardless of fault.

Personal Injury Protection

Again, medical bills can quickly add up, and many standard policies do not cover injuries sustained by the at-fault party. Personal injury protection offers coverage of up to 80 percent for medical bills, loss of income, and other expenses related to a covered accident. 

Gap Insurance

In the event that your car was stolen or declared a total loss by insurance, you may find that the amount offered in the settlement is not enough to secure a loan for a new vehicle. This is because many policies calculate payouts based on Actual Cash Value of a vehicle (starting value minus depreciation). Gap insurance can help cover the difference between your settlement and the actual amount needed to purchase a new car. 

When to Hire a Car Accident Attorney

If you have been in an accident and are struggling with your insurance company, it may be time to hire an attorney. In most cases, your insurance should work with you to provide a fair settlement in a reasonable amount of time. In other cases, however, your insurance company may not be acting in your best interest.

If you have been involved in an accident in Colorado and have received a low ball settlement, poor communication, or an unfair denial, contact Dave Roth with the Roth Group. Your first consultation is free, so call or go online today.