6 Types of Auto Insurance Coverage
People in general do not think much about their car insurance coverage. At the very least, there is often a minimum state requirement, and beyond choosing the deductible, most car policy definitions only take a look. But understanding what these specific items cover, the limits and the amount you add to your premium can have a significant impact on how much you pay for your policy.
Even if you are required to have a minimum or all of the types of coverage listed below and can not make any changes, it is always a good idea to know what is in the fine print. Also, once you know what you are really insured for, you can actually identify the areas where you are insured.
After all, you obviously do not want to have more coverage than you need, but you also do not want to be exposed in case of an accident.
Not having the right coverage could have serious consequences.
1. Property Damage Liability (PD): This mandatory coverage (in almost all states) pays for damage caused to another vehicle in the event of an accident for which you are legally responsible. Given the high price of many vehicles and the unknown damage you could have on public properties, it is a good idea to have adequate coverage here.
2. Bodily Injury (BD) Liability: This coverage is very important and covers the payment for damages due to an injury or death in an incident for which you are legally responsible. While this covers medical expenses, it can also be used to pay legal defense costs. We all know how expensive medical assistance and legal representation can be, so once again, this coverage is very important.
3. Medical payment: this coverage is used to pay medical expenses incurred by you and your passengers during an accident regardless of whether or not you are at fault. This coverage is optional in most states with a no-fault law because coverage without fault will pay for these expenses and will often cover things such as lost wages linked to the accident.
4. Coverage of uninsured motorists (UM): there is one thing that you can not control while on the road and is whether other drivers are insured or not. While it is a legal requirement in most states to have car insurance, there are many on the roads that drive without it. This coverage protects you and your passengers in case you are involved in an accident with an uninsured driver.
It usually covers medical expenses, but some states extend this also to vehicle damage.
5. Collision coverage: this coverage is subject to a deductible and covers the damages caused to your own vehicle in a collision. Like homeowners insurance, this coverage is usually required if you have a loan in the vehicle. When observing the collision coverage take into account the real value of the vehicle that is insured. Older used vehicles may have little or no use for collision coverage.
6. Full coverage: in addition to the collision damage, the comprehensive coverage will pay the damages, subject to a deductible, of: theft, acts of nature, fire, vandalism and collisions with animals. Like collision coverage, many lenders will require full coverage on vehicles with a loan.
As you can see, your car policy has much more than meets the eye. It is not as simple as paying a premium for general coverage and a specific deductible. If you observe your own policy, you can also see that some of these numbers seem a bit low.
For example, only $ 100,000 for damages due to injury or death of someone in an accident is practically nothing these days when demand agreements regularly exceed seven figures.
For liability coverage, you will normally see the limits listed in a divided format, such as 100,000 / 200,000 / 50,000. This means that the coverage limits would be:
- $ 100,000 for injury or death of a person in the accident.
- $ 200,000 for injuries or death for any number of people in the accident.
- $ 50,000 for property damage caused to other vehicles or property in the accident.
Keep this in mind when checking your car insurance policy and make sure it is adequately covered by liability. Given the litigious nature of our society, it would be unwise to be insured just to save a couple of dollars on your premium in the case of a car insurance claim. Collision and / or comprehensive coverage is much easier to calculate in terms of how much to buy.
Since this coverage is used to pay for the damage done to your property, the amount of coverage needed is clearer and the deductible you select can be based on the value of the vehicle and how much money you have in an emergency fund to cover the deductible and / or damages.
As with most types of insurance, no one likes to pay. When we do not have the need for insurance, it seems like a waste of money, but a single unexpected event can be devastating for you and your family.
You must be very careful when choosing insurance to ensure not only that you are adequately insured, but to not spend money on more insurance than you need. Being polite with your policies can lead you to make the right decisions to protect yourself and your family, as well as keep so much money in your own pockets as well.