The ABCs of Auto Insurance

Owning and learning to drive a car is a must in the United States.  Not all states have subways or accessible public commute.  Car insurance is not a luxury; in fact, it is a necessity.

Car insurance traces its roots from China and to-date it is the most widely purchased kind of insurance coverage.  What it offers primarily is liability protection, but secondly protection against property damage may also come in handy.  If you have an accident and someone gets hurt, a portion of the medical expenses can be shouldered by the insurance policy.

Basic Guidelines

Each state has its own car insurance requirement; hence, it is advisable to make yourself familiar with the guidelines that pertain to your own state. Check the website of the Department of Motor Vehicles of your state for additional references and guidelines.  If not, you may end up in jail for reasons you did not know.

It is a given that all insurance buyers want low rates.  Car insurance premiums are based on many factors such as age, sex, driving record, credit history, and the type of vehicle you drive. Usually, the more road violations or accidents you have, the higher the premium you will pay.  Your credit score has a lot of bearing on the rates you will get.  The newer your car is, moreover, the higher your premiums may be.  Males under 25 years old tend to pay more; this demographic is statistically proven to be more prone to car accidents.

The amount deductible is directly proportional to the coverage; the higher the deductible, the higher the liability coverage.  Have the policy agreement in black-and-white.  Know every minute detail of the plan.

The following gives you a general definition of what each insurance policy means:

Liability Coverage is considered the most essential coverage on any auto insurance policy. A standard liability policy is made up of two policies, bodily injury and property damage. These policies cover you for the amount, up to your policy limit, of personal injuries and property damages (usually includes the vehicle) that you are “at fault” for, and, therefore, have caused the other party in an auto accident.

This coverage is usually stipulated as three numbers such as, 25/50/10. This means that this particular policy coverage would provide personal injury coverage up to $25,000 per person, up to maximum coverage of $50,000 for all injuries in that accident, and maximum property damage coverage of $10,000 for that auto accident. Also, virtually every state requires a minimum liability coverage that is stipulated in the same manner as just described.

Medical Coverage: This policy is designed to cover the costs, up to your specific maximum limit, of injuries that you have sustained in an auto accident no matter who was “at fault” in an auto accident. It is required in some states so check the website of Department of Motor Vehicles of your state for further details.

Personal Injury Protection or PIP is essentially the same as medical coverage but differs because it encompasses more coverage protection. Under PIP, you are covered, up to your maximum policy limit, for related costs to personal injury such as lost wages while recuperating, in some cases even rehabilitation costs, and funeral expenses. PIP is required in every “No Fault” insurance system state, currently 12 states, as well as some additional states. Therefore, you need to verify if this coverage is required in your state.

Collision Coverage is optional insurance that covers collision damages to your vehicle, regardless of who is at fault. If your vehicle is financed collision coverage is probably required.

Comprehensive Coverage is optional insurance that covers damages to your vehicle that is caused by anything else, natural disasters, vandalism, auto theft, etc. If your vehicle is financed comprehensive coverage is probably required.

Uninsured and Underinsured Motorist Coverageare two similar policies. Uninsured Motorist Insurance helps cover your costs, up to your policy limits, if you are struck by a motorist (“at fault”) who possesses no insurance coverage. Underinsured Motorist Insurance helps cover your costs, up to your policy limits, if you are struck by a motorist (“at fault”) who possesses less than adequate insurance coverage.

Surveys have revealed that a significant percentage of motorist who operate a motor vehicle are driving with either no insurance or inadequate insurance. Therefore, it is considered prudent to possess these policies.

Endorsement Coverage-refers to usually smaller, optional policies such as: roadside towing, daily rental car reimbursements (while your car is being repaired), emergency roadside assistance, etc.

Also consider an umbrella policy where your insurance will cover both your car and your other assets like your house.  In this case, the company may entitle you for discounts.  Make sure though that you’re working with a pro, an agent rich in experience and industry credentials.

False Myths about Auto Insurance

Many believe that the insurance company pays for all damages irregardless of whose fault the accident is.  You should never take this as a given; if somebody else is driving at the time of the accident, the insurance company may refuse your claim.  Insurance companies may also refuse your claim if you are at fault and your policy specifically says that it will not pay for claims made by at-fault clients.

There are a lot of insurance companies in the market.  Choose the one which will give you the best value for your money.