Auto insurance is often misunderstood by the general public but it is more understandable than you may think.
Basic coverage is a term often used to describe that coverage necessary to drive legally, and comprehensive coverage is often used to describe covering your auto and passengers. There is, however, more to auto insurance than those two basic terms.
Liability is the coverage needed to legally drive in the United States, but it is also an important coverage to consider when protecting your assets such as a home or retirement account.
This is because if you are found at fault in an auto accident, you may be sued for large sums of money.
If the court finds you at fault and you do not have enough liability insurance, you will pay out of pocket for every dollar over your coverage limit. This makes liability a very important aspect of auto insurance and one to consider wisely.
The National Association of Insurance Commissioners breaks liability into three parts: bodily injury, property damage and uninsured motorist coverage.
Bodily injury liability coverage pays for bodily harm you cause others in an accident at which you are considered at fault. It does not pay for damage to your car or injuries in your car.
Property damage liability covers damage to the property of others, including other vehicles, buildings, fences or trees. Uninsured motorist coverage protects injury to you or your passengers in the event that you are injured by a hit-and-run, or uninsured driver.
Some states have no fault laws, which means that your auto insurance policy covers you in an accident regardless of fault.
Collision coverage pays to fix physical damage to your car caused by a collision. This coverage is costly and if you have an older vehicle, or a vehicle that is not worth a substantial amount of money, you may want to skip this coverage.
If you have a loan on your vehicle this coverage is mandatory. It is important to note that this coverage covers your vehicle regardless of fault. If another driver causes damage to your car, his property damage liability will cover your vehicle.
If you have collision coverage, you can hand the case over to your insurance company and it will handle the details and deal with the other driver’s insurance company. This is an added benefit of collision coverage.
The deductible is the amount you are liable for in the event of damage. This amount is typically between $250 and $1,000.
Comprehensive coverage is also called other than collision coverage. It covers theft, vandalism, malicious mischief, fire and some other specific coverages that are not caused by a collision. This coverage generally has a lower deductible, which means you pay less in the event of a loss.
Other coverages include rental coverage, medical payments, towing or roadside assistance. Rental coverage provides a rental car in the event of an accident.
This coverage varies by company so be sure to talk to your insurance agent about the details. Roadside assistance pays for towing your vehicle from the event of an accident, and sometimes covers assistance, such as flat tire repair or lock-out.
Medical payments coverage covers passengers in your vehicle for funeral expenses or hospital bills for injury or death, which occurs while a passenger in your car.