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Types of insurance policy for car

Any insurance policy for car is designed to cover the risk of financial responsibility or the loss of a motor vehicle that the owner may face if his vehicle is involved in a accident that results in property or any physical damage. Privileges and immunities clause of Article IV of the U.S. A. Constitution provides the rights of citizens in each respective state when traveling to another. Insurance companies are providing a motor vehicle owner with an insurance card for the particular coverage term, which is to be kept in the vehicle in the event of a traffic collision as proof of insurance. Currently, states have started passing laws to allow electronic versions of proof of insurance to be accepted by the authorities.

Table of Contents

Best Car Insurance Companies in 2021
Cheapest Car Insurance Companies 2021
Types of insurance policy for car

  • Liability coverage
  • Collision insurance
  • Comprehensive insurance
  • Gap insurance
  • Towing and labor insurance
  • Rental reimbursement insurance
  • Rental reimbursement insurance


Best Car Insurance Companies in 2021

Car Insurance Ranking
State Farm
American Family

Cheapest Car Insurance Companies 2021

Average Annual Rates are
USAA: $885
Geico: $1,168
State Farm: $1,234
Travelers: $1,267
Progressive: $1,373
American Family: $1,391
Farmers: $1,682
Nationwide: $1,864
Allstate: $1,880

Types of insurance policy for car

In this article we will discuss types of insurance policy for car and their benefits in details

1.Liability coverage

It is required in most US states as a legal requirement to drive a car. Liability insurance may help to cover the damages for injuries and property damage to others for which you become legally responsible resulting from a covered accident.

2.Collision insurance

Collision insurance helps pay to repair or replace your car if it is damaged from,

  • A collision with another vehicle
  • A collision is occurred with an object, such as a fence or tree
  • A single-car accident which involve in rolling or falling over
  • If you are leasing or financing car, collision coverage is typically required by the lender. However, if your vehicle is paid off, in this situation collision insurance is an optional coverage on your car insurance policy.

3. Comprehensive insurance

Comprehensive insurance helps in pay to replace or repair your vehicle if it is stolen or damaged in an incident that is not a collision. Comprehensive, sometimes called, other than collision, coverage, typically covers damage from fire, vandalism or falling objects such as tree or hail. If you are financing or leasing your car, your lender likely requires comprehensive coverage. If you own your vehicle outright, it’s an optional coverage on car insurance policy.
However if you are going to shopping for auto insurance or are reviewing your current policy, you may want to consider comprehensive coverage.

4.Gap insurance

Gap insurance, often flogged by pushy car salesmen, which cover the difference between the amount paid by you for your car and the amount an insurance company would give you if it was written off or stolen.
It explains the basics of gap, or guaranteed asset protection insurance to give it its formal name, to help you decide if you need it, as well as how it works and what you need to watch out for if you are thinking about buying it.
Gap insurance is not essential as your car insurer should ALREADY pay out for a replacement car. And if your car is less than 12 months old, it will be a brand spanking new car?

5.Towing and labor insurance

Coverages and limits of Towing and labor are different for each carrier that offers towing and labor coverage, However typically, it pay the cost of towing your car to repair shop when it is vehicle is unable to be driven and covers a specific amount of necessary labor charges at the place of the breakdown.
Items which can be covered by towing coverage may be

  • Towing
  • Tire changing
  • Gas, oil, and water delivery
  • Battery services
  • Lockout services

Most car insurance companies only offer towing and labor coverage if the owner has other types of car insurance which cover the physical damages, comprehensive and/or collision, as part of the policy. Some policies limit coverage and only pay amount when a claim has been issued against you about physically damage coverage after a covered accident.

Now question arises ,is towing and labor coverage mandatory?
Answer is No, because Towing and labor an optional coverage.

6.Rental reimbursement insurance

Rental car reimbursement insurance helps you pay for a rental car, or for alternate transportation such as bus fare or cab rides (in cause if you need it) because of a covered loss. When you can use rental reimbursement, coverage it depends on some other types of coverage you have on car insurance policy.
For example, if you have collision coverage and you are in a car accident, that is typically considered a covered loss. Your rental reimbursement coverage may help you to pay for transportation expenditures while your vehicle is in the repair shop after the collision.
You may typically choose where to rent a vehicle, but some insurers partner with specified rental car companies. If you got on rent a vehicle from any company that has an agreement with your insurer, the rental car company may bill the insurance company directly, helping to prevent you from paying out of pocket. If your rental company is not in your auto insurance company’s network, you will likely need to pay upfront for the rental car and then request reimbursement from your insurer.

7. Classic car insurance

If you have an antique or classic car, you may need classic car insurance to protect your vehicle. Classic car insurance is a special type of policy that helps you to protect antique or classic cars. Definitions of a classic car can vary, but according to Insurance Information Institute a car is considered a classic when it is 25 to 30 years old at least.
Classic car insurance may also help to protect some other high-value vehicles such as muscle cars, hot rods, vintage military vehicles and exotic or luxury vehicles.
Standard car insurance provide some coverage for a classic car, but it may not cover the full value of the vehicle. Because standard policies take age, mileage and depreciation into account when determining it how much your car is worth. But if a classic car has been customized or restored, for example, it may be worth more than its depreciated value. So, we can say that a regular car insurance policy may not be enough to help cover the cost of repairs after an accident.


Car insurance policy you need depends on how much coverage you are legally obligated to get, and how much coverage you need for your situation. Each state has certain legal requirements for car insurance policy, and not meeting them can result in negative consequences. You can check out car insurance state guides to see the legal car insurance minimums in your state to get more information.

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