5. What are the common types of insurance coverage?
Individuals may purchase insurance coverage for nearly any foreseeable risk. The following are common types of insurance policies:
• Automobile Insurance – Vehicle insurance covers damages suffered by either the individual or automobile pursuant to any number of risks. Common risks covered in vehicle insurance policies include the following:
⁃ Liability Coverage – This type of policy covers, up to the policy amount, the costs and damages suffered by third parties as a result of operating the insured vehicle.
⁃ Note: This type of vehicle insurance coverage is mandatory in every state.
⁃ Collision Coverage – This is a form of property insurance that will pay the value of the damages suffered to a vehicle in a crash, up to a stated amount or up to the total value of the vehicle.
⁃ Note: This type of insurance is generally required by a lender when purchase of a vehicle is financed?
⁃ Comprehensive Coverage – This type of insurance coverage insures the vehicle against forms of damage other than collision, such as vandalism, theft, hazardous weather, etc.
⁃ Uninsured (& Underinsured) Motorist Coverage – This type of insurance coverage provides indemnification for injuries suffered by the driver and passengers of the covered automobile when another party without insurance causes personal injury in a crash.
⁃ Note: It also covers situations where a third party causing the damage or harm is unidentifiable. This type of coverage is mandated in many states.
⁃ Other Coverage – Other insurance coverage in a vehicle policy may include towing and rental car expenses, additional medical payment coverage, and accidental death coverage.
⁃ Discussion: Why do you think there are so many special types of coverage applicable to ownership and operation of a vehicle? How does the cost-benefit vary with each type of vehicle insurance?
⁃ Practice Question: Donald is purchasing a new car. He is financing the car through his bank. What types of insurance will Donald likely have to purchase?