What You Need to Know About Car Insurance
Your car insurance coverage is designed to safeguard you against the obvious financial risk associated with personal injuries and property damage caused by auto accidents, theft or vandalism. Nearly all states mandate you to purchase at least a minimum level of liability insurance coverage. Other types of auto insurance coverage may be optional or required, dependent upon the individual state requirements. The lender of record will also generally require that you purchase collision and comprehensive coverage if you have a car loan or lease on your vehicle.
This is the state-mandated auto insurance coverage you’ll absolutely be required to carry on your vehicle.
Bodily Injury Liability (BI): Shields your assets if you’re held responsible for an auto accident in which others are injured or killed. Limits are paid out per person and then per accident. Therefore, a policy with limits of 25/50 work out to be a maximum of $25,000 per person and $50,000 per accident.
Property Damage Liability (PD): Covers repairing or replacing vehicles or property of other people that you are responsible for damaging.
Property Damage Liability coverage will likewise pay for the legal fees associated with defending you against legal actions related to accidents. To sufficiently safeguard your assets, you undoubtedly want to purchase much more than the minimum amount of coverage mandated in your state.
Liability limits of at least 100/300/50 are strongly recommended. That would provide you with bodily injury liability coverage limits of $100,000 per person, $300,000 per accident and property damage liability limits of $50,000.
Underinsured and Uninsured Motorist
Uninsured Motorist and Underinsured Motorist coverages are mandated in some states and an option in some others. It typically makes sense to purchase them, unless you think you can afford to pay personally for medical fees or have a good health insurance policy that will cover your injuries without incurring a lot of out-of-pocket expenses.
Uninsured Motorist Bodily Injury: Pays your medical expenses if you’re injured by an at-fault driver that is without car insurance. Depending upon policy terms, it might also cover pain and suffering and lost wages.
Underinsured Motorist Property Damage: Pays, up to a preset cap, if an at-fault uninsured driver damages your car. If your state doesn’t require it, you might want to skip it and instead obtain collision coverage, which is a better choice to protect your car.
Underinsured Motorist Bodily Injury Coverage: Covers you if the at-fault driver has too little auto insurance to address medical expenses arising from your auto accident-related injuries.
Underinsured and Uninsured Motorist Bodily Injury usually extend coverage to your passengers, and may also cover you, and those listed on your policy, while riding in other automobiles or as pedestrians.
Medical Payments (MED or MedPay) and Personal Injury Protection (PIP)
Medical Payments and Personal Injury Protection both cover injuries related to an auto accident, regardless of who is found to be at fault. Having said that, they are not the same coverage.
Medical Payments Coverage (MED or MedPay): Covers reasonable medical costs for you and your passengers due to injuries sustained in an auto accident while in your insured vehicle. MedPay is only required in a handful states, but available as voluntary coverage in most other states.
Personal Injury Protection (PIP): Also referred to as no-fault coverage because PIP is required in no-fault states. PIP benefits vary by state and may require you to pay a co-payment and/or deductible.
MedPay and PIP coverages also typically extend to you and your family members if injured while riding in another person’s vehicle or if hit by a vehicle while a pedestrian.
Collision and Comprehensive Coverage
Physical Damage coverages of Collision and Comprehensive are not required by any state, but can be mandated by finance and leasing companies. These are the types of insurance that give coverage to your vehicle, regardless of fault.
Collision (Coll): Pays to repair or replace your car if it’s damaged in an accident with another car or object, such as a tree, guardrail or fence . It also covers the upset of your car, such as rolling it down an embankment.
Comprehensive (Comp or OTC): Is also called other-than-collision coverage because it insures your car against damage caused by something other than an auto accident. That includes theft, fire, flood, vandalism, and striking an animal. Comprehensive insurance also covers damage from a natural disaster, such as a tornado, hail storm or hurricane.
Collision and Comprehensive coverages come with deductibles of your choosing. Your lender or leasing company may require you choose a certain deductible amount, such as $500.
Additional or Optional Coverages
These coverages are optional, ar eusually fairly inexpensive and may afford a lot of protection. Keep in mind though that they may not be helpful in all circumstances. Determine what your specific needs depending on you rfinancial situation are and if you should add any optional coverages to your current auto policy.
Gap Insurance: This coverage pays the difference between the actual cash value (ACV) of your car and the amount you may still owe on your loan or lease if your car is totaled in a covered accident. It is sometimes called loan/lease coverage. You’re required to carry collision and comprehensive on your vehicle in order to even be eligible to buy gap insurance. Sometimes this coverage may already be rolled into your auto loan or lease payment so check with your lender first.
Towing and Labor (TL) or Roadside Assistance: Towing and Labor usually covers the cost to tow your car to a local repair facility or make minor repairs after a covered accident. Roadside Assistance usually covers towing, minor repairs and fuel delivery, even if there was no accident.
Rental Reimbursement: This coverage pays the cost of renting a replacement vehicle if yours is out of commission due to a covered accident. The coverage usually pays up to a certain daily or weekly limit. In some cases the rental company will work directly with your insurance company and you may not be responsible for any out-of-pocket expenses.
Custom Parts and Equipment: If you’ve customized your vehicle, you need additional coverage limits for those special upgrades and parts. Custom equipment (such as high end rims or tires, custom paint, or running boards)wouldn’t normally be covered unless you add on this special policy endorsement. Without the custom parts coverage, you ‘d typically only be covered for the stock item delivered with the new vehicle.
Does the Insurance Company Cover All Else?
Even with all of the ocoverage you think you have, there are circumstances where you’d have to go into your own pocket for certain expenses. These are some things you’ll typically need to cover on your own dime:
Deductibles: The amount of money that you’ve agreed to pay out of your own pocket before your insurance coverage limits take over. You can have different deductibles for different coverages such as comprehensive or collision but liability coverage never has a deductible.
Exclusions: Events or situations your policy specifically will not cover, such as property damage or personal injury you intentionally cause or damage to your own car due to mechanical failure or wear-and-tear. These are fairly standard but make sure you are aware of your policy limitations.
Costs Above Policy Limits: Any expenses that exceed the coverage cap listed on your policy contract for coverage you’re entitled to receive. You’re left responsible for any costs that surpass your limits. This is where a homeowners or umbrella policy may kick in if available.
Get a Great Rate on Your Next Policy
As previously stated, there are numerous factors that can affect your auto insurance premium. Some of these may include your age, the state in which you live, the make and model of your car, where your car is parked at night and your driving history. While you do not have control over all of these faactors, there are some things you can do to help lower your premium:
- Increase your insurance deductible, but not too much that you can’t afford to pay it in the event of a claim.
- Eliminate optional coverages if you don’t need them (e.g. rental reimbursement if you have other means of transportation while a car is in the shop).
- Eliminate collision and comprehensive coverage if you drive an older car that wouldn’t cost much to replace and if you can afford to pay for repairs if necessary. If th ebook value of the car is neglible, the money you’re spending on carrying those coverages doesn’t make sense.
- Ask about available auto insurance discounts (low-mileage discounts, discounts for safety or anti-theft devices) for your car insurance policy. Discounts vary by insurer.
- Avoid buying a vehicle prone to theft or expensive to repair, this can raise your rates.
- Drive safely to establish a good driving record and you may be eligible to receive a good-driver discount.
- Maintain good credit. Credit can be used in most states to help determine your rates.
Shop Around for Auto Insurance Rates
It’s vitally important to shop around for auto insurance coverage. Insurance premiums for the same coverage on the same car can vary widely among different insurers. From coast to coast and city to city, USA Car Insure is the right place to find the best car insurance companies to deal with. Contact one of our partners for a free quote today.