If you are shopping for an auto insurance policy, it’s helpful to know what types of coverage are available. There are a variety of different types of coverage, but the two main ones are liability coverage and collision and comprehensive coverage. These two types of coverage are almost exact opposites of each other.
Liability insurance covers damages to others that you’re responsible for. In terms of auto insurance, that includes property damage and bodily injury as a result of an accident where you are at fault. All states require drivers to carry a minimum amount of liability insurance on their cars, but minimum amounts vary by state.
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When you have a car accident, liability pays for the other car to be repaired or replaced if it is totaled. It also pays for any damage to property you caused while driving, such as knocking down a fence. If someone is hurt in the accident, this coverage pays for medical bills and lost wages. If you are sued as a result, it also pays for “pain and suffering” damages and your legal bills up to your liability insurance limits.
Collision and comprehensive insurance, on the other hand, covers your own vehicle if it is damaged. Collision pays for repairs if you have an accident, and comprehensive pays for damages caused by something other than an accident like theft, vandalism, fire, natural disasters and such. If the damage is so great that the cost to repair the car is a significant percentage of the car’s value, it may be considered totaled and you may get a cash value payout. The maximum amount you can receive is based on the current value of the car, not the replacement cost.
