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What is in a basic auto insurance policy?
An auto insurance policy is a package of different coverages. Most states require you to purchase a minimum amount of certain kinds of coverage. But if you're interested in protecting yourself from a lawsuit or from hefty repair bills, then it makes sense to buy more than what's required.
Liability insurance
Liability coverage is the foundation of any auto insurance policy, and is required in most states. This coverage applies to injuries you, the designated driver or policyholder cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.
This is probably the most important type of car insurance, and it's required by most state auto insurance laws. Liability car insurance protects you against the cost of damage and injury that you cause to another in an automobile accident. Definitely consider buying more than the state required minimum to protect assets such as your home and savings.
Medical Payments or Personal Injury Protection (PIP)
This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. Depending on the specifics of the policy, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
Property Damage Liability
This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.
Collision
This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible.
Comprehensive
This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.
Uninsured and Underinsured Motorist Coverage
This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit and run driver. Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.
Most states require neither type of coverage, but some require one or the other, and a few even require both. They're more often required in no fault states.
Coverage vs.Cost
You need to balance coverage against cost. Choosing the appropriate level of coverage depends on a number of factors, including the value of your vehicle, the value of assets you must protect, the amount of money you can afford to pay out of pocket, and your tolerance for risk. If a claim against you exceeds your coverage limits, you will be personally responsible for the amount that exceeds the coverage.
Its important that you read and understand the coverage that your carry on your insurance. If you don’t understand then call your auto insurance broker and have all your questions answered.
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Fast Free Quote
Most Companies offer Automobile Insurance Discounts for Good Drivers, Non Smokers, Good Students, Senior Drivers, Multiple Car Discount, Auto/Home and Educational Discounts such as Youth Education and Safety courses.
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