What Is the Most Basic Car Insurance You Can Get?

March 18, 2013

Car insurance is incredibly important; you need car insurance to make sure that your car is covered, whether you purchase full or basic car insurance. While the most basic form of car insurance may change from one car insurance company to another, there are some simple ways to understand what the general basic car insurance type is, and what you can expect to get from it.

Collision Insurance
Collision insurance is simple. Collision insurance pays for the damage to your own car, but does not cover the damage to another car. It makes sure that you do not have high expenses to cover your own car repair.

Liability Insurance (Third Party)
Liability insurance, also known as third party insurance, is the most basic form of car insurance. This is the type of car insurance that is mandatory to drive a car in most states. This form of car insurance simply helps to pay for the damage that is done to another car when you cause the accident. This coverage does not cover your own car, so any damage to your own car is not covered. This is where the name comes from; the liability is taken away so that you don't personally have to pay for damage to the other car.

What a Basic Auto Insurance Policy Includes

Technically, basic auto insurance policy does not really exist. Every auto insurance policy can be customized to meet the needs of the insured. There are six basic types of coverage and all of them can be added or removed from an individual policy. Auto insurance policies allow you to set your coverage limits and deductibles. Below is a brief description of the various coverages available.
  • Bodily Injury Liability. This coverage handles any injuries that you cause to others in an accident. Liability insurance is required in most states but the minimum requirements are usually not adequate. Most experts recommend 100/300 when it comes to Bodily Injury.
  • Medical Payments or Personal Injury Protection. This is the maximum amount your insurance will pay when an accident is your fault and people in your car are injured. It covers the medical costs of the driver and passengers in your vehicle. It also covers lost wages, and if necessary, funeral costs. This insurance is often required by states.
  • Property Damage Liability (PD/PL). The damage caused to third party property, such as vehicles, fences, yards or even houses is covered by Property Damage/Property Liability insurance. This is the main or only component of the most basic of car insurance policies. The higher the dollar amount, the more this coverage will cost.
  • Collision. This covers the cost of damage to your vehicle. If you are driving an old vehicle with a low replacement value, it is best to drop this type of coverage. If you are leasing a vehicle or driving a newer, more expensive vehicle, this coverage is necessary. Keeping your deductible high will lower the cost of collision coverage.
  • Comprehensive/Collision. Damage caused by anything other then an accident or collision are covered by comprehensive. A few examples would be fire, flood, and hail. If you are financing a new or used car, the finance company will require this coverage. This type of coverage is important in order to make sure if you're ever in an accident, you will receive the complete Kelley Blue Book value of your car, as derived prior to the accident. However, if you have a low value vehicle, it is best to skip this type of coverage.
  • Uninsured/Underinsured Motorist Coverage. If you live in a tort state and are involved in an accident with a driver who has no insurance or inadequate insurance, then this coverage will make up the difference on your costs. Uninsured motorist coverage is a good idea if you live in a state with a high percentage of drivers without insurance. The rate in California is now almost 25%.

Every insurance policy is different. Understanding the different types of coverage can help you make the best decision for your situation.