Auto Insurance Coverage

Highlights

  • Understand what the different components of an auto policy covers.
  • Determine what auto insurance coverage you need and want.
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Understanding Your Auto Insurance Coverage

Many auto insurance policies include the following components.  Understanding these components will help you know what your policy protects and how much coverage you need.  Compare multiple insurance quotes as prices can vary significantly across different insurance providers.

Liability Insurance
Liability insurance protects you from financial losses in the event of a lawsuit claiming for the damages done to another person or a property.  Most states require you to have liability insurance to register a vehicle or for a driver's license.  For auto insurance, liability insurance covers the following:

  1. Bodily Injury
    Bodily injury covers the expenses associated with an injury or losses.  Typically, your auto insurance policy will cover: Medical bills to treat the injury or sickness , any loss of income as a result of the injury, funeral cost, pain and suffering.
  2. Property Damage
    Property damage covers the damages you have done to another person's car or property in the accident.  This can include any vehicle repairs and any damages to a home, fence, garage, etc

When deciding between how much coverage you want, you will typically see liability coverage grouped together as 100/300/100.  The first number represents the amount of bodily injury coverage for each person involved in the accident.  The second number is the amount of bodily injury coverage for each accident.  The last number is the amount of property damage coverage you have.  In the 100/300/100 example, the insurance would cover a max of $100,000 in bodily injury per person, a max of $300,000 in bodily injury per accident, and a max of $100,000 for property damages. 

It is generally recommended that you have a liability limit of 100/300/100.  Having a lower coverage limit may put your personal assets at risk.  If you are unable to pay for the costs outside of what the insurance covers, you may be forced to sell your assets to make up the remaining payment.

Collision Coverage
Collision coverage will cover the repair and replacement cost for your car when your car is involved in a collision with another vehicle or object. The coverage can be used only when you have exceeded your deductible.  For example, if you have a $1,000 deductible and the repair cost was $1,700, you will pay $1,000 out of pocket and the insurance will pay $700.  Deductibles for collision coverage range from $0 to $1,000.  Having a higher deductible will lower your auto insurance cost, but you will have pay more out of pocket before you insurance coverage comes in.

Comprehensive Coverage
Comprehensive coverage covers damages to your car that are not considered as a vehicle collision.  It will help pay for damages from auto theft, falling objects, fire, storms, floods, earthquakes, and a collision with an animal.  Like collision coverage, the insurance will pay the remaining amount less your deductible.  Deductibles for comprehensive coverage can range from $0 to $1,000.

Medical Payments
Medical payment coverage is an optional coverage that pays for the medical expenses for you and your passengers.  The coverage also extends to when you are a passenger in another person's vehicle or if you are hit by a car when on foot.  Common coverage levels are $1,000, $5,000, $10,000, $25,000, $50,000, and $100,000.

Personal Injury Protection (PIP)
Personal injury protection covers any medical expenses, funeral cost, pain and suffering, and lost wages for you or your passengers regardless of fault.  PIP is different from medical payments in that it provides broader coverage.  Medical payments only covers medical expenses and is an optional coverage.  In some states, PIP is required.

Uninsured Motorist Coverage
Uninsured motorist coverage covers you in the event of an accident with an uninsured driver.  This coverage also applies to a hit and run accident.  Coverage includes auto repair bills, medical bills, lost wages, and pain and suffering.

Underinsured Motorist Coverage
Underinsured motorist coverage covers you in the event where the other driver's coverage is not high enough to pay for the damages done to your car, property, or to you.  This coverage will make up for the difference up to your policy's limit.

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