Most people get a car and they get car insurance and that’s that. Beyond that point, they become complacent in terms of their insurance premiums until after they have experienced an accident. Auto insurance is an important part of a family’s financial planning and it is necessary to be educated about the “whats” and “hows” of auto insurance to enjoy the benefits that it has to offer. This article explains what kinds of car insurance exist and how do you get the best deal out of it:
The most basic types of insurance coverage are:
This type of coverage is mandatory in all but a few states. When you are in an accident with another car, and you are at fault according to the regional traffic rules, then Liability Coverage protects the person you have hit. This coverage includes 3 types of liabilities:
- Bodily injury coverage of one person injured in the accident.
- Bodily injury coverage for everyone injured in the accident.
- Property damage coverage.
The amount of auto liability coverage you need depends on a number of factors. Many states have a minimum amount of liability coverage required while some states don’t. Be sure to check with your insurer the minimum amount for your state.
It is recommended that if you earn well, then you should opt for a higher amount of liability coverage, since if your current amount doesn’t cover the health bills of the other person involved, they may come after you for the rest.
Liability coverage covers the cost of the person you hit. Collision coverage covers the cost of the damage to your car after the accident. If you have a loan against your vehicle, then it is required that you have collision as well as comprehensive coverage.
Comprehensive coverage covers the costs of your vehicle when it is affected by natural causes and not by accident-related causes. For example: theft, a tree falling on the car, fire etc.
If you have an older car, it is generally recommended that the collision and comprehensive coverage be dropped from your car insurance policy. The general rule to follow is that if the payments toward your comprehensive and collision coverage is more than 10% of the total current value of your car, then they should be dropped.
These are the basic types of coverages. Some additional types are:
Personal Injury Protection (PIP):
In the event of an injury during an accident, PIP covers you and your family members. If you have health insurance for the same, PIP is generally unnecessary, unless required by your state.
Generally the same idea as PIP, except that this acts as an extra protection layer for the car owner if his PIP does not cover all of the expenses of his injury.
Uninsured/Underinsured Motorist Coverage:
This is for the worst kind of accident. Imagine you are in accident for which you are not at fault, and the person who is at fault is underinsured or uninsured. His insurance does not cover the liability of your damages and your medical bills, so now what to do?
Uninsured/Underinsured Motorist Coverage is the best bet in this case. This will cover your damages and bills even if the person that hit you is uninsured. You don’t have to worry about paying the bills yourself once you have this type of coverage.
This type of coverage covers your towing costs if your car becomes un-drivable after an accident. This is mostly unnecessary if you belong to an automobile service club like AAA or if your car is under warranty; in such cases, roadside assistance is readily provided for your car. But if you do not belong to AAA and you car’s warranty is expired, Towing Coverage is the way to go.
If your car is damaged in an accident, then there are 2 cases that could take place:
- If you are the victim, then the person who was at fault generally covers the costs of your rental car till your car gets repaired.
- If you are at fault in the accident, then you need rental insurance reimbursement to pay for the damages.
It cannot be stressed enough that car insurance policies should be selected after careful scrutiny and evaluation. Cheaper is not always the way to go. Comparing different insurance policies and selecting one that works for you and covers you in the event of an unfortunate accident is of the utmost importance. It’s better to pay a bit more than to face the consequences of a bad insurance policy. Wisely choosing the best policy will not only protect your wallet, it will also protect you and your assets, that’s why making the effort to do so is definitely worth the time.