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It Really Isn’t That Hard to Understand Auto Insurance
At first glance it might seem that figuring out all the ins and outs of auto insurance are somewhat confusing. But once you are clear on the different types of coverage, you’ll find that it all falls into place. And you should take the time to understand it, because you wouldn’t want to find out after you file a claim that the policy you purchased doesn’t include a type of coverage you had with your previous carrier. Simply stated, your auto insurance is based on seven primary types of coverage, which make up a standard auto policy. The coverage has its own separate premium and your premium is the total of these separate premiums.
Let’s break it down so that it makes more sense.
- Bodily injury liability: In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets. Bodily injury liability provides protection if you injure or kill someone while operating your car. It also provides for a legal defense if another party in the accident files a lawsuit against you. Bodily injury liability covers injury to people and not to your vehicle.
- Medical payments, no-fault or personal injury protection coverage: - Medical payments pay for the medical expenses of the injured driver and passengers in your car. There may also be coverage if you are injured as a pedestrian by a vehicle.
- Uninsured motorists coverage: Because of the large number of uninsured motorists, this is very important coverage to have, even in states with no-fault insurance. Uninsured motorists coverage pays for injuries caused by an uninsured driver or, in some states, a hit-and-run driver, in a crash that is not your fault. In some states there is also uninsured motorist coverage for damage to your vehicle.
- Comprehensive physical damage coverage: This pays for losses resulting from incidents other than collision. For example, comprehensive insurance covers damage to your car if it is stolen, damaged by flood, fire or animals. To keep your premiums low, select as high a deductible as you feel comfortable paying out of pocket.
- Collision coverage: Pays for damage to your car when your car hits, or is hit by another vehicle or other object. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket. For older cars, you might want to consider dropping this coverage, since coverage is normally limited to the cash value of your car.
- Property damage liability:Protects you if your car damages someone else’s property. It also provides you with legal defense if another party files a lawsuit against you. It is a good idea to purchase enough of Property Damage Liability insurance to cover the amount of damage your car might do to another vehicle or object.
- Rental reimbursement:Coverage pays for a rental vehicle (usually up to $25 a day) when the insured's vehicle is out of commission as a result of a loss covered under comprehensive or collision coverages.
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