Understanding Auto Insurance

By Rissa Watkins

  • Overview

    Understanding auto insurance might seem impossible. Don't let all the numbers and insurance jargon confuse you. Auto insurance breaks down to three main areas. The first covers people you hurt and their property. The second protects you if you are hurt. The third protects your property if it gets damaged or stolen.
  • Liability

    The first set of coverage is for liability. Most states have a minimum amount you have to buy to drive legally. This insurance helps to pay for bodily injury or property damage to other people when you are found liable. Most bodily injury coverage has a per person/per accident limit. Once that limit is reached, no matter how high the medical costs, the insurance company will not pay any more. Property damage coverage helps pay for the repair of vehicles, walls, trees and other property when you are found liable for an accident.
  • Your Medical Coverage

    The second set of coverages protects you and your passengers. This can vary from state to state. However, the most common are uninsured, underinsured and medical payments. Uninsured covers any medical costs for you or your passengers if you are hit by someone that has no insurance and they are liable for the accident up to the policy limits. Underinsurance pays if they have insurance, just not enough. Medical payments pay for injuries no matter who is at fault. If you or your passengers have no medical insurance, you might need this coverage.

  • Property Damage

    The last set of coverages protects your property. These are collision and comprehensive coverage. Collision pays to repair your car when you hit something unless it is an animal. Comprehensive covers your vehicle if it is stolen, vandalized, you hit an animal, among other scenarios. Comprehensive insurance covers everything but collision, but check your policy for exclusions to the coverage. Most policies will pay the value of a car based on original manufacturer's specifications, with no consideration for additional items added to a car's value.
  • Considerations

    You can add a deductible to your collision or comprehensive coverage to lower your insurance rate, the higher your deductible, the lower your rate. If you have a $500 deductible and you have $1000 worth of damage from vandalism, the insurance company will only pay you $500. If you have a $500 deductible and you have $200 worth of damage the insurance company won't pay you anything. So if your damages are lower than your deductible, it might be best to fix it yourself without involving the insurance company.
  • Optional Coverage

    Some insurers will let you add more coverage to your policy such as roadside assistance, zero glass deductible or additional custom parts or equipment. Roadside assistance is a service that allows a policy holder to call if he needs his car towed for any reason, other than an accident. If you are in an accident, call your insurer and a rep will arrange a tow or will have the police tow the vehicle. Zero glass deductible allows you to repair or replace your windshield for free, without having to pay your deductible amount. Additional custom parts or equipment is the coverage you need if you have added anything to the car that wasn't originally part of the manufacturer's specifications. For example, if you added a $20,000 paint job or $10,000 rims you would need this coverage to replace those items if the car is stolen or damaged. Talk to your agent to see if you need this coverage.
  • Expert Insight

    If you have any questions or are confused, ask before getting the policy. It is your insurance agent's job to make sure that you understand exactly what is covered and what is not. After you have a claim is the wrong time to find out you don't have the right coverage.
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