In order to answer this question properly, we need to look at the insurance industry as a whole, from our standpoint as consumers. Insurance can basically be broken down into two categories, Property & Casualty, referred to as P&C, and Life and Health insurance, which is self explanatory by name.
The main distinction between the two is that P&C insurance can involve a third party claim, meaning someone other than you and your insurance company. For example, if you cause a car accident, someone else can sue you and your insurer. That person is the third party. An outside party, or third person, is not capable of suing your life insurance company if they die. The contract is between the first party, you, and second party, your insurer.
Within these categories, we find separate “lines” of insurance. Examples of P&C lines include the following: homeowner’s, auto, or car insurance, and business insurance, which can be broken down into over a dozen specific lines. A few examples of Life & Health insurance include: long-term disability, accidental death and dismemberment, and unemployment insurance.
So let’s look at the types of car insurance available to you. The word “coverage” is interchangeable with “types,” and is a more accurate description in insurance terms. There are several coverage options available for car insurance. They include:
Liability-only auto insurance coverage
Physical damage coverage
Property damage liability
Uninsured motorist coverage
Underinsured motorist coverage
Personal injury protection (also referred to as “med pay” in some states)
Almost every type of car insurance coverage listed above can be broken down further. Liability coverage is broken down into three categories; per person, per incident, and property damage coverage, which are referred to as your auto insurance liability limits. Further, physical damage can be broken down into collision and comprehensive coverage.
There are many options available when it comes to auto insurance. The more you know about how insurance works, the easier it’ll be to make decisions about what to purchase and what to avoid, based on your unique situation.
We suggest that you contact your insurer or independent agent online or by phone for an explanation of your current coverage or to receive an updated quote to ensure you are receiving the right coverage at the right price.
