Auto Insurance Coverage Types Overview

Auto Insurance Coverage – What’s It All About?

Car insurance policies are really a neatly packaged pile of documents comprised of several specific coverages. How big your particular pile gets is in direct proportion for what all you choose to purchase. Your checking account balance will also reflect the size of your pile, rising and falling accordingly, again depending on the amount of car insurance you buy. Here’s a short lesson on the basics of auto insurance that will hopefully help you gain some insight into what is best for you or at least help in your fight against insomnia by boring you to sleep.

Liability

Considered the foundation of your car insurance, liability is the coverage most states now require you to have by law. These minimums can be found at your state’s insurance board (http://www.naic.org/state_contacts/sid_websites.htm). This insurance is designed to pay for damage or injury you cause to others and even covers legal fees if you’re sued. But the minimum amounts required by state laws are frighteningly low in the event you manage to do some serious damage to someone or someone’s car. If you have much of anything in the way of worldly goods, it’s a good idea to buy more (much more, in fact) liability insurance than is absolutely required in your state. Remember how high hospital emergency rooms are nowadays, and don’t forget how much it cost you to replace Aunt Agnes’ fender last year when she ran over the curb and hit the garage.

Collision and Comprehensive

If you’re prone to cause accidents, you probably ought to go ahead and get that collision insurance your wife keeps nagging you about. It won’t improve your driving, but it will help repair your vehicle faster than putting your spare pennies in the sock drawer. Although you won’t collect more than your car’s actual cash value (not its replacement cost or the flight-of-the-imagination value you’ve subconsciously attached to it), you will at least be able to either get it fixed or make a down payment on something else. To keep your premiums low, choose a higher deductible of $500 or $1,000, but be prepared to pay it before even thinking the insurance company will do their part.

Comprehensive is the other half of these famous oft-coupled coverages, and it covers nearly everything else – outside of being hijacked in a Martian invasion – that could happen to your car that don’t occur as the result of a wreck. Like your collision insurance, comprehensive coverage will only pay you what your car is actually worth, and the deductible-paid-first rule applies here as well. Comprehensive is also noted as one part of the “full-coverage” policy almost any lender will require you to have before they finance your car.

 Medical, PIP, and No-Fault

Often called “MedPay” in insurance jargon, medical coverage is what keeps Dr. Jekyll from turning into Mr. Hyde when it’s time to pay your physician. Knowing you’re able to pay medical expenses also takes a huge load off your shoulders if you’re already totally stressed from being in a wreck, and what’s really nice is that with this coverage, it doesn’t matter if it was your tiny error in judgment that caused the accident or of that fool driving the other car who can’t tell the difference between the brake and the gas pedals. If it was the other driver’s fault, your insurance company may very well seek to recoup their expenses, however.

Expanded forms of medical coverage, such as Personal Injury Protection (PIP) and other “no-fault” coverages, may or may not be required in your state. Again, surf on over to your state’s board of insurance to check it out (see above link). These expanded features offer compensation for childcare and lost wages, so this coverage is definitely worth looking into. You may elect to not purchase any more than the state-required minimum for PIP or MedPay coverage or you might choose not to buy it at all if you’re not mandated to do so by your state laws. If you happen to already have terrific health insurance and disability insurance, you may decide, hey, to heck with that type of coverage. But do remember that MedPay will pay medical bills for passengers other than your family, unrelated drivers of your car (who have your permission to drive), and funeral expenses; the other insurances won’t. So let that lay a little guilt trip on you when you’re making your decision. Or not.

Uninsured/Underinsured Motorist

Being run over by a hit-and-run driver or some yahoo who doesn’t have any insurance can ruin your day, unless you went ahead and told your agent to sign you up for uninsured motorist (UM) coverage at the critical time – before the accident. A lot of states are also making UM a requirement since the number of yahoos seems to be increasing daily. Or, to be more charitable, maybe it’s the number of people just too poor to be able to afford insurance coverage that’s getting bigger.

Underinsured motorist coverage (UIM) is another pretty important coverage. This pays out when the driver who slams into you has coverage, but the ensuing damage is more than his coverage can handle.

Minimum amounts of UM/UIM are smart to keep because if the person hightails it after hitting you, at least you will get some pain-and-suffering compensation.

That’s It, Folks!

Because it is always up to each individual to pick and choose insurance coverage, be sure you give all these coverages some serious thought time. And please don’t think this is an exhaustive study on all the insurance protection available out there; that would be a thousand-page, eight-pound tome no one would read, just use to press flowers. But don’t be afraid to ask your insurance agent questions about all the different kinds of auto insurance and whether or not any would be beneficial to you – answering those questions is in his/her job description. And don’t forget to read that policy when you get it. It can’t be more boring than this article!  

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