Auto Insurance - What do You really Need?

When shopping for car insurance, you must take a number of factors into consideration in order to obtain the best coverage for your needs at a reasonable price. For instance, how much is your vehicle worth? Is it new? Is it financed? What state do you live in? And your assets; do you have a lot to protect? All of these questions must be answered as you search for the right policy. Listed below are the most common types of auto insurance offered. Some are required; others are not. Most allow you to choose the amount of coverage and deductible that suits your needs. A good insurance professional can be of enormous value in helping to explain the choices and options available to you.

  • Bodily injury liability - A required coverage, bodily injury liability protects you if you’re sued for injuring someone in an accident, including pedestrians and passengers riding with you. The policy pays the victim’s medical costs, loss of earnings, and pain and suffering. It also covers you if someone is injured by a family member who’s driving your car, a friend driving your car with permission, or a family member who is driving someone else’s car with permission.
  • Property damage liability - Also required, this liability insurance pays for any damage you do to someone else’s property.
  • Medical payments - This coverage, offered in fault states but not a requirement, pays the medical and funeral bills of anyone injured in your car, without regard to who caused the accident. It also covers your family members if they’re hurt as pedestrians or while riding in someone else’s vehicle, including a bus or taxi. Generally, medical payment insurance will only cover the bills that regular health insurance doesn’t pay.
  • Personal-injury protection (PIP) - PIP, a no-fault item, covers your personal medical bills up to a stated limit, part of any lost wages, funeral expenses, and in some states, replacement services (a babysitter while a mother is hospitalized, for example).
  • Collision - This portion of your policy covers repairs to your own vehicle, no matter who caused the accident. If your vehicle is financed, the creditor will require that you carry this type of insurance as long as the loan is in effect; if you own the car free and clear, this coverage is optional. The price of collision coverage depends on the type of vehicle and the size of the deductible, which can range from $100 to $1,000. The higher the deductible that you choose, the lower your cost for this coverage. If involved in an accident which wasn’t your fault, your deductible may be covered by the at-fault driver’s insurance policy. Collision is typically written to cover your vehicle’s fair market value only, which generally drops over time.
  • Comprehensive - As with collision coverage, if your car is financed, the lender will require comprehensive insurance. If owned outright this coverage, too, is optional. Comprehensive pays for random damage to your car from fire, flood, earthquake, hail, vandalism, and road debris. It also covers theft and, perhaps, the use of a rental car after a theft. Deductibles can range from $100 to $1,000; the higher the deductible you choose, the lower your comprehensive premium. Windshields may be insurable separately, with no deductible at all. Comprehensive will pay up to your vehicle’s fair market value, and no more.
  • Uninsured and underinsured motorist - Required in many but not all states, uninsured- and underinsured motorist coverages pay the cost of your injuries and those of your passengers if you’re hit by an uninsured driver who’s at fault, an at-fault driver whose insurance policy won’t cover all of your damages, or a hit-and-run driver. It also covers lost wages and, in some states, reimbursement for damages to your car. In no-fault states, this coverage kicks in if you’re injured badly enough to sue. You can collect from this insurance on top of your no-fault personal injury protection.
  • Towing and service / rental car reimbursement - This optional coverage pays for towing and labor charges for repairs if you have an accident or your car breaks down. However, if you belong to an auto club, you probably already have these benefits.

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