Learn what the various policy types are and what they can mean for your rate before you buy. Understanding the different types of policies can help you avoid paying too much in premiums.

Understanding the Various Policy Types

Requirements vary from state to state based on the laws of each individual state. All states require some form of financial proof of responsibility in order to legally operate a vehicle on public roads and highways. For most states, the minimum requirement is limited to a liability policy with minimum levels of coverage, but a handful expect more. Knowing what your state's minimums are is something that a provider can help you with, but if you already understand the various types of insurance before speaking with an agent, you may be able to save money.

Older couple touring in their car together.

Liability Insurance: This usually refers to two types of coverage: bodily injury liability and property liability. This policy is sold as a package to cover these two areas that is expressed in three ways: to take care of the medical expenses of one person you have an accident with, to look after the medical expenses of multiple persons you are involved in an accident with, and to take care of any property damaged in an accident where you are found to be at fault. Thus, liability coverage expressed as 25/50/15 would be $25,000 bodily injury for one person, $50,000 bodily injury for two or more persons, and $15,000 property damage insurance. These numbers are the maximum that will be covered by your policy.

Collision Insurance: This is protection for your own vehicle's repairs if you are involved in an accident that is either your fault or with an uninsured/underinsured motorist who cannot pay for the repairs.

Comprehensive Insurance: This pays for your vehicle if it is damaged in a way that does not involve a driving accident or if it is stolen. For example, if your car were to catch fire while you were driving it, your comprehensive coverage could help pay for repair or replacement.

Uninsured/Underinsured motorist: This protects you in the event you are involved in an accident with someone else who is at-fault, but does not have the required protection or fiscal ability to pay for your damages. This protection will also pay for medical expenses for you and/or your passengers.


Know Your Plan

Save money by not allowing an agent on commission to talk you into a product that you do not feel you will need. Buy online commission-free.


Avoid Making a Mistake You'll Later Regret

Often after an accident, people expect their policy will pay for damage that is only covered under another type.