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The auto insurance types of coverage


Everyone who signs up with an insurance company enters into a contract. In return for a regular payment, the insurer agrees to pay if any defined risk causes you loss or damage. When there are thousands of people signed up, it spreads the risk. In effect, those that are lucky pay those that suffer the losses.


This pays whenever you cause loss or damage to someone else by the way you drive. This could be another driver, passengers in your own or another’s vehicle, people walking on the road or sidewalk, or the owners of property you hit, e.g. a fence around a yard. This form of auto insurance is mandatory because state governments around the country believe all drivers should be financially responsible and have money to pay a minimum amount to everyone they injure.


Liability cover only pays out to third parties. Your own losses need separate cover. If your own vehicle is damaged in a collision, whether with another vehicle or a static object like a tree, this will pay for repair so long as the cost is less than the fair market value of the vehicle.


This pays all the costs of repair or replacement if your vehicle is damaged or lost, and there’s no collision. This covers damage caused by more extreme weather events like flooding and tornadoes, vandalism and theft. It pays either the fair market value of the vehicle or for repair where this is economic.


In some states where the system is no-fault auto insurance, it’s mandatory to carry enough insurance to pay your own and any third party’s medical expenses. In other states, you have to look at your health insurance cover and decide whether it provides enough cover for you and your family. Otherwise, you can add this cover.


When you take out an auto loan, the lender will almost always insist you carry both collision and comprehensive cover. If you are buying a new vehicle and it’s totaled, this pays the difference between the fair market value payable under the auto insurance policy and the amount owing on the auto loan.


This covers costs including towing expenses, storage fees while the vehicle is waiting repair, hiring an alternate vehicle, and so on.

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