Becoming an Adult
4 Types of Car Insurance Coverage to Understand
Robin King
Do you need to purchase car insurance and not sure about what kind of coverage you really need? If so, it will help to better understand more about the following four types of coverage.
Collision Coverage
Collision coverage is designed to specifically cover damage that is caused by accidents with other vehicles or stationary objects, such as a road sign, tree, pothole, or even a parked car. One thing to understand about collision coverage is that it will only pay for damages that are up to your vehicle's actual cash value. This means that it is more advantageous to get collision coverage on a brand new car that is worth a lot of money, rather than an older car that doesn't have much value left in it. Your insurance company will determine your vehicle's actual cash value based on its age, mileage, and current condition.
Comprehensive Coverage
Comprehensive coverage is designed to protect your car from situations out of control when you were not driving. This often includes theft, so that if your car is stolen you are protected and can receive the actual cash value of your car. However, you also have coverage for if a tree were to fall on your car, if the car was in a garage that caught on fire, or if flooding causes water to get into the car.
Rental Reimbursement Coverage
If your car is not drivable due to an accident or some other incident that is insured by your car insurance policy, rental reimbursement coverage will help pay for your rental vehicle while you are otherwise without a vehicle of your own. This is an optional coverage option, but it can help save you a lot of money in an emergency.
Gap Coverage
If you are using financing to pay for your vehicle, gap insurance can help you from being upside down on your loan and owing the bank more money than what your car is worth. This is best for vehicles that are brand new and you are paying off the full value of the car. If something were to happen soon after getting your vehicle where it was totaled, you would normally still owe the balance of the vehicle. That balance may be more than the actual cash value since your vehicle loses value from driving it off the lot. Gap insurance will pay for the remaining balance of your vehicle so that you are not stuck with a big debt for a vehicle that is now gone.
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After I graduated college, I started to feel like an adult. I started teaching at a school. I also bought a car. And I became the owner of several insurance policies. I obtained a comprehensive insurance policy for my car. I also secured my first life insurance policy at this time. I didn’t want my family members to be burdened with funeral costs if I suddenly passed away. A few years after graduating college, I became a homeowner. After this joyous occasion, I invested in a homeowners insurance policy. On this blog, I hope you will discover the most common types of insurance people purchase.