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| Auto Insurance |
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Car Insurance Coverage protects you against financial loss in the event of an at-fault accident. It is an agreement between you and your insurance carrier. You agree to pay the annual premium and the insurance company agrees to pay your losses as defined in your insurance policy.
Auto insurance provides property, liability and medical coverage:
- Property coverage pays for damage to or theft of your insured vehicle.
- Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
- Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy is comprised of 6 different kinds of coverage. Most states require you to buy some, but not all, of these types of coverages. If you are financing your vehicle, your lender may also have requirements for your insurance policy.
Most auto insurance policies are for 6 months to a year. Your auto insurance company should notify you by mail when it’s time to renew the policy and to pay your premium. |
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What's covered in your basic auto insurance policyy?
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Your auto insurance policy may include six coverages. Each coverage is priced separately.
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1. Bodily Injury Liability
This type of coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and your family members listed on the insurance policy are also covered when driving someone else’s vehicle with their permission.
It is very important to have enough liability insurance, because if you are involved in a major pile-up, you may be responsible for a large amount of damages. Definitely consider buying more than the state-required minimum amount of liability coverage to protect your assets such as your home and savings.
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2. Medical Payments or Personal Injury Protection (PIP)
This type coverage pays for the treatment of injuries to the driver and passengers of the policyholder's vehicle. At its minimum, PIP coverage can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in car accident. It may also cover funeral costs.
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3. Property Damage Liability
This type of coverage pays for damage you (or someone driving your vehicle with your permission) may cause to someone else's property. Usually, this means damage to someone else’s vehicle, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures you may have damaged.
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4. Collision
This type of coverage pays for damage to your vehicle resulting from a collision with another vehicle, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at-fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible you paid.
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5. Comprehensive
This type of coverage covers you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.
Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.
Comprehensive auto insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.
States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.
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6. Uninsured and Underinsured Motorist Coverage
This type of coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured driver or a hit-and-run driver.
Underinsured motorist coverage comes into play when an at-fault driver does not have enough insurance coverage to pay for your total amount of damages. This coverage will also protect you if you are hit as a pedestrian. |
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