WHAT INSURANCE COVERAGE DO I NEED?
Who Needs Auto Insurance?
Automobile accidents can cause great financial and economic insecurity. Financial loss may include property damage, medical bills, and legal costs if a lawsuit arises. Anyone who owns a car should purchase auto insurance so that these important financial protections are provided. Most states either require the owner of a vehicle to purchase insurance or provide proof of financial responsibility. In addition, your auto lender may require you to purchase auto insurance to protect them against damage to a financed vehicle.
An auto insurance policy can include several different kinds of coverage. Your independent insurance agent will provide professional advice on the type and amount of car insurance coverage you should have to meet your individual needs and comply with the laws of your state. Here are the principal kinds of coverage that your policy may include:
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Most auto liability insurance policies contain three major parts: liability insurance for bodily injury, liability insurance for property damage, and uninsured/underinsured motorist coverage.
Bodily injury liability insurance does not protect you or your car directly. If you cause an accident in which other people are injured due to your negligence, this insurance protects you against their claims for damages, such as medical expenses, lost wages, and pain and suffering.
Property damage liability insurance pays for any damage you cause to the property of others, such as damage to another vehicle, fence, or tree caused by a collision.
Uninsured motorist coverage protects you directly. This coverage pays if you are injured by a hit-and-run driver or a driver who does not have auto liability insurance. This coverage, in effect, takes the place of the liability insurance that the other driver should have purchased but did not. Underinsured motorist coverage applies when the other driver is at fault and whose limits of liability are lower than the damages you sustained. Your underinsured motorist coverage will pay you an additional amount up to your policy limits. Uninsured and underinsured coverages may provide coverage for both bodily injury and property damage losses combined, or you may be required to purchase separate coverage for bodily injury and property damage.
· Collision – Covers the cost of damage to your own car in an accident. You don’t have to figure out how much to buy – that depends on the vehicle(s) you insure. But you do need to decide whether to buy it and how large a deductible to take. The higher the deductible, the lower your premium will be. Deductibles generally range from $250 to $1,000. Collision coverage is important to have if a car is new and valuable, but less important as the value of the vehicle declines. If the car is only worth $1,000 and the deductible is $500, it may not make sense to buy collision coverage. Collision insurance is not generally required by state law.
· Comprehensive – Covers the cost of miscellaneous damages to your car not caused by a collision, such as fire and theft. As with Collision coverage, you need to choose a deductible. The higher deductible you choose, the lower your premium will be. Comprehensive coverage is generally sold together with Collision, and the two are often referred to together as Physical Damage coverage. If the car is leased or financed, the leasing company or lender may require you to have Physical Damage coverage, even though the state law may not require it.
· Medical Expenses – Covers the cost of medical care for you and your passengers in the event of an accident. The limit you choose under Medical Expenses coverage is the maximum that will be paid for medical claims to each driver. Therefore, if you choose a $2,000 Medical Expense Limit, each passenger will have up to $2,000 coverage for medical claims resulting from an accident in your vehicle.
Other Optional Coverage
Depending on what you want to protect against and how much money you want to spend, there are several other types of coverage which you may purchase. These include:
Medical Payment Coverage (MPC) pays for the medical and funeral expenses for you or others injured or killed in an accident while riding in or driving your auto. This coverage also often extends to insured’s that are struck by a vehicle while acting as a pedestrian. Covered expenses include hospital, surgical, chiropractor, dental, and funeral expenses. This might duplicate benefits provided by your health insurer.
Rental reimbursement coverage or transportation expenses pay for a rental car if your vehicle is damaged by a covered loss. This coverage is usually purchased with a daily and total maximum. For example, $20 per day up to a total of $600.
Towing or Emergency Road Service coverage pays the cost of towing your car to a repair shop.
When it comes to car insurance coverage, cheaper isn’t always better. Be sure to do your homework to find a balanced policy — one that covers you adequately in the event of an accident but one that doesn’t make you pay for coverage you don’t need. Most importantly, don’t skimp on liability coverage. It’s better to pay a few hundred dollars more a year than to wind up in the poor house from accident litigation.