If you own an automobile, you most likely know something about auto insurance, but there’s a lot to consider when deciding what type of auto insurance to purchase for your car. Understanding the basics of auto insurance will help you make the choice that best suits your needs.
An auto insurance policy offers a variety of types of coverage. This includes the following:
Liability provides coverage for any bodily injury and property damage to others for which the insured is determined responsible. Generally, liability coverage also extends to any rental car.
Collision covers any damage to the policy holder’s own vehicle in any type of collision. Collision pays for the repair of the vehicle, or for the cash value of the vehicle if it is deemed “totaled.”
Comprehensive coverage pays for any loss or damage to the vehicle from an incident other than collision. This includes, but is not limited to, theft, fire, weather, and impact with an animal.
Loan/lease payoff, or GAP, coverage is designed to provide protection during the time shortly after purchase/lease, when the car’s value has sharply depreciated, and there is a gap between the actual value of the vehicle and the amount owed.
Loss of use, or rental reimbursement, covers the cost of a rental car to replace the insured car while it is being repaired after it is damaged in an accident.
Medical coverage pays any medical expenses (regardless of fault) incurred in an auto accident.
PIP, or Personal injury protection pays any medical expenses (regardless of fault) for the insured driver for treatment due to an automobile accident. It at times also covers lost wages and other damages and is required in some states. It is sometimes deemed “no-fault” coverage because premium costs should not increase due to filing a PIP claim.
Uninsured motorist coverage pays for any damage to the car caused by a motorist without liability insurance.
Under-insured motorist coverage pays for any damage to the car caused by a motorist with insufficient liability insurance.
Most states require auto insurance, but the amount required varies from state to state. It’s a good idea to know what is required in your state, as well as what optional coverage is worth considering. Each state’s requirement is stated in terms of bodily injury liability limits and property damage liability limits, and anything beyond this is optional.
There are many factors to consider when determining what coverage suits your needs. For instance, consider your vehicle and how much would it cost to replace or repair it. Whether or not to opt for collision or comprehensive is based on the value of the vehicle. Don’t forget that other types of insurance, such as health and home owner’s, may cover the damages caused by an automobile accident.
In short, determining the amount of auto insurance, like any type of insurance, to purchase is about how much the policy holder is willing to pay out of pocket compared to how much they wish the insurance company to cover.