What are the 3 types of car insurance?

Third-party liability insurance is insurance that pays when the policyholder injures another person or causes damage to another person’s property. In car insurance, third-party liability insurance is required in almost every state, and it only applies when the policyholder causes an accident. Third-party liability insurance does not pay for the policyholder’s own injuries or property damage.… read full answer

The Parties in Third-Party Liability Insurance

In third-party liability insurance, the first party is the policyholder and the second party is the insurance company. The third party is anyone else who becomes involved. Since liability means legal responsibility, third-party liability refers to the policyholder’s legal responsibility to someone else.

For example, say that Driver A accidentally rear-ends Driver B at a stop-light, causing minor damage to both cars’ bumpers. Driver B can file a claim with Driver A’s third-party liability coverage to pay for the damage. However, Driver A cannot file a claim with their own third-party insurance, since they are the first-party in this scenario. Instead, Driver A would need to have collision insurance for the damage to their own car to be covered.

Types of Third-Party Liability Car Insurance

Third-party liability car insurance incorporates two subsections: bodily injury and property damage liability. In addition, car insurance policies usually include three separate payout limits to cover different aspects of third-party liability. For instance, a policy written as 25/50/25 refers to limits of $25,000 for bodily injury claims per person, $50,000 for bodily injury claims per accident, and $25,000 for property damage claims.

Third-party liability car insurance is a term most frequently used outside the United States. In the U.S., insurance companies will usually just call it liability insurance instead.

A good comprehensive deductible is an amount that the policyholder can afford to pay if their vehicle is suddenly damaged by something other than a car accident, such as vandalism or a natural disaster. Comprehensive insurance deductibles typically range from $100 to $1,000, but they can sometimes be as high as $2,500. You choose your … read full answerdeductible when you purchase your policy, and the higher the deductible is, the lower your premium will be.

Comprehensive Deductible Example

As a reminder, a comprehensive deductible is the amount that you have to pay out-of-pocket when filing a comprehensive insurance claim. For example, if a hailstorm causes $5,000 in damage to your car and you have a $1,000 deductible, your insurance company will only pay $4,000 for the repairs.

How to Choose Your Comprehensive Deductible

Before you decide on a deductible, you should consider how likely you are to file a comprehensive claim. If you live in an area that is prone to natural disasters or has a high crime rate, for instance, it may be a good idea to get a low comprehensive deductible.

The five types of car insurance are liability, comprehensive, collision, uninsured/underinsured motorist, and personal injury protection/medical payments. These are the most common types of car insurance, though many insurance companies sell other types of coverage as well, like gap insurance and rental reimbursement.

The 5 Types of Car Insurance

1. … read full answerLiability

Covers other people’s expenses after an accident caused by the policyholder.

2. Comprehensive

Repairs or replaces the policyholder’s car if it’s damaged by something other than an accident, like vandalism or a natural disaster.

3. Collision

Pays to repair or replace the policyholder’s car after any accident, regardless of fault.

4. Uninsured/underinsured motorist

Covers the policyholder’s repair and medical expenses if they’re hit by a driver without insurance or without sufficient liability limits.

5. Personal injury protection (PIP) and medical payments (MedPay)

Cover the policyholder’s medical expenses after an accident, regardless of fault.

Liability insurance is required in nearly every state, and some states also require additional coverage like PIP and uninsured/underinsured motorist insurance. There are no states that require comprehensive or collision insurance, but those types of insurance are usually mandatory for vehicles that are leased or financed.

To learn more, check out WalletHub’s guide to the different types of car insurance.