Thinking about your auto insurance coverage is probably not the most exciting thing you can do today, but it is never a bad time to review your policy and understand what is covered (and what is not). It is certainly better to understand your coverage now, rather than be surprised after you’ve been in an accident or have to file some kind of claim.
What is the Purpose of Auto Insurance?
Auto insurance protects you from financial losses in the event of a car accident, theft, or some other unexpected event that involves your vehicle or a covered driver in your family. Your car insurance policy is a contract between you and your insurance company in which you agree to pay your premiums and the insurance company agrees to provide insurance coverage for specified events and up to certain policy limits that you select.
Most states require that drivers have a minimum amount of car insurance that covers personal injury and property damage liability, which is coverage for other people and their property if you are at fault in an accident.
Auto Insurance Coverage Options
Beyond the state minimum requirements, most people will carry additional auto insurance coverage depending upon their needs and the risks they face. A basic auto insurance policy includes several forms of coverage, each subject to certain limits and with a premium amount attached to it. Other types and levels of coverage vary by insurance company and by state, but there are some basic types of coverage that you should know about when purchasing your policy.
Liability coverage does not protect you or your car. Bodily injury liability coverage provides protection if you injure or kill someone else while driving your car. It protects you against an injured party’s claims for damages, including medical expenses, lost wages, pain and suffering. It also provides for your legal defense fees if another party involved in the accident sues you. Property damage liability coverage pays for any damage that you cause to the property of others, such as another vehicle, a fence or a tree, and for your legal defense in the event of a lawsuit.
Besides liability coverage, your auto insurance policy will likely provide additional types of coverage to protect you if you are in an accident.
Uninsured motorist coverage protects you if you are injured by a hit-and-run driver or by a driver who does not have auto liability coverage. It takes the place of liability insurance that the other driver should have, but does not. Underinsured motorist coverage protects you if another motorist is at fault for a collision but does not have enough insurance to cover your losses.
Collision coverage is protection for physical damage to your vehicle when it hits or is hit by another vehicle or object, for example a tree. Comprehensive coverage pays for losses from almost all other types of damage to your vehicle other than that resulting from a collision, such as theft, fire, vandalism, weather, birds or animals, glass breakage, and so on.
Medical payments coverage, which is also referred to as no-fault or personal injury protection is an optional coverage in most states. It helps to pay for medical, dental and funeral expenses for you or your passengers, regardless of who is at fault.
Rental reimbursement coverage is an optional type of coverage that provides for payment for a rental car if your vehicle is damaged by a covered loss and you need to rent a vehicle while it is being repaired.
You also need to understand how your auto insurance deductibles work. A deductible is the amount of money you are required to pay before your auto insurance kicks in and begins to reimburse you. If you have comprehensive and collision coverage, you will have comprehensive and collision deductibles. If you have a $250 collision deductible and you are involved in an accident for which you are at fault, you will be required to pay the first $250 of any repairs made to your vehicle.
The amount of your deductibles will have an impact on the premiums you pay. Generally the higher your deductible, the lower your premium. You can have different comprehensive and collision deductibles.
What other questions do you have about your auto insurance coverage? Do you think you have the right coverage for you needs? We can help you review your policy and make sure you understand what is covered, and determine if you need to make adjustments. Contact us today for a complete auto insurance review.