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When it comes to auto insurance, there are some basic things you may already
know. Like the fact that most states require it in order to drive, and that it can
be expensive. But do you really understand the coverage you are paying for?
Do you even know whether you have too much or too little coverage?
The following information will help you through the twists and turns of automobile insurance coverage.
Auto insurance policies are primarily designed to:
You can mix and match the coverages to suit your specific needs. Coverage may also extend to rental cars, and you may also purchase optional coverages (for towing and car phones, for instance). Since policy types, limits and requirements vary by state, the following should be considered general information and not specific to any particular state.
Protect Others & Their Property
Liability Coverage
If you have an auto accident, the legal costs could be devastating. Liability coverage offers protection against claims, property damage or bodily injury to a third party that you or a member of your household accidentally caused while driving your car. This coverage applies only if the driver is considered legally responsible for the damage.
There are two types of liability coverage:
Bodily Injury Liability Coverage covers you for accidental Bodily Injury which you or the driver of your car causes to someone else. If you are found to be at fault for an accident and legally responsible for the injuries caused to the other party, this coverage will compensate that person for their injuries, up to a limit of coverage which you have chosen. If you are sued because of a covered automobile loss, the cost of your legal defense is also covered. Property Damage Liability Coverage covers you for accidental Property Damage which you or the driver of your car causes to someone else. If you are found to be at fault for an accident and legally responsible for the damage to someone else's car, this coverage will pay for the repairs to that car, up to a limit of coverage which you have chosen. If you are sued because of the accident, this coverage also covers the cost of your legal defense.
Various coverage limits can be selected to provide you with the right amount of protection. In most states, these coverages are mandatory.
Protect You & Your Passengers
Personal Injury Protection (PIP) or "No-Fault" Benefits cover you, your family members and sometimes your passengers for medical expenses related to injuries sustained in an auto accident, regardless of who is responsible for the accident. This coverage includes medical, surgical, dental, hospital, lost wages and certain other related expenses associated with an auto related injury. This same coverage extends to you or your family member in an accident as a pedestrian.
This coverage is usually mandatory in states that have no-fault laws. Limits and restrictions vary by state. Medical Payments Coverage covers you for medical expenses related to injuries sustained in an auto accident. The last thing you need to worry
about at the time of an accident is your medical insurance. The medical payments portion of your policy assures that you, your family members and passengers in your car will receive necessary medical and dental services due to injuries resulting from an auto accident. regardless of who caused the accident. Coverage may also be provided if you and your family members are involved in an accident as a pedestrian.
This coverage is mandatory in most states. Limits vary by state. credit, which saves time and increases accuracy. When a car dealership advertises "instant credit approval," that dealership is using credit scoring.
Protect Your Vehicle
Besides legal and medical damages, another common loss is the physical damage to your vehicle that can result from an accident. There are two types of physical damage coverages: Collision and Comprehensive.
Collision coverage pays for any damage to your car caused by accidental impact with another vehicle or object (such as a tree) or if your vehicle overturns. The maximum amount to be paid is limited to the actual cash value (ACV) of your vehicle, which is often referred to as the "local market value," less the collision deductible. In most cases, a deductible must be met before this coverage applies. Please remember that the actual cash value is only a starting point. The actual cost of the car may be more or less depending on the actual condition of the car and depreciation.
Comprehensive coverage pays for most types of damage to your car resulting from a situation other than a collision, such as falling objects, fire, theft, windstorm, hail, water, flood, vandalism, or impact with a bird or animal. The maximum amount paid is limited to the actual cash value of your vehicle less the "other than collision" deductible. Collision and Comprehensive Coverages are optional. However, most autolease and finance agreements require you to purchase these coverages to ensure the car will be repaired or replaced after a loss.
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