It is very important to know the basics of insurance in general, but especially auto insurance. This is because auto insurance is mandated by state law. All automobiles must be insured prior to driving. Many are confused by auto insurance and it is true that finding the best coverage can be time-consuming and complicated. The investment in time will pay off monetarily for the rest of your life. This blog post will serve as your foot-in-the-door of the auto insurance house of knowledge.
Your automotive insurance is essentially a contract between you and your insurance provider. You decide what kind of coverage you need – and can afford – and your provider will tell you how much you owe monthly and your deductible cost when a claim is filed. There are a few major types of coverage available to you:
Bodily Injury Liability
This is the type of coverage that is required in most states. This is because this insurance will cover the medical expenses for injuries that you cause to someone else. Bodily Injury Liability will cover the victim’s medical expenses, lost income, pain and suffering, and even funeral expenses if you are responsible for their injuries. After a serious accident, for which you are responsible, you could potentially be sued for lots of money. Your liability coverage will pay up until your limit is reached. You will want to make sure this limit is enough to protect assets such as your savings and home.
Personal Injury Protection
Bodily Injury Liability has the other car covered, but what about you and, quite possibly, your family? This is where Personal Injury Protection, or PIP, comes in. PIP can cover the very same things your liability covers for the other driver. An important note, your PIP coverage will protect you and your loved ones when traveling in another person’s car as well. Because this coverage often duplicates your existing medical plan, it is entirely optional.
Property Damage Liability
PIP and Bodily Injury Liability cover persons on both ends of the accident, but what about the vehicles involved or any other property? You guessed it – Property Damage Liability covers damages to another person’s vehicle if you are found at fault. This is also based on a limit that you determine. If you cause an accident and total a $35,000 vehicle, but only have Property Damage coverage up to $20,000, you will incur the rest of the cost. This is another type of insurance that is required in most states.
Collision
Collision Coverage will cover damages to your car from a collision with another car or object. Your insurance company, after receiving the deductible will pay up to the actual cash value of your car. So the amount you pay monthly on this type of coverage depends on what kind of car you drive.
Comprehensive Coverage
All the damages outside of a car accident are covered by Comprehensive Coverage. This includes but is not limited to: theft, fire, falling objects, earthquakes, hail, and floods. Like Collision Insurance, your insurance company will pay up to the actual cash value of your automobile – assuming the deductible has been paid. This is not required by any state; however, if you purchased your car through a loan, the lending institution may require you to carry Comprehensive Coverage until your loan is paid in full.
There is a ton of information out there on insurance of all types. As the title states, these are simply the most basic, or major, types of coverage. If you are currently insured, your insurance agent can help you understand anything you need to know about your policy. If you are buying a new car, or new to the country, we hope this has helped you feel confident about finding the right insurance for your automobile.
