Auto insurance protects you from the costs of a car accident or the theft of your car. However, coverage isn’t automatic, or limitless.
You have to choose how much coverage you actually want.
Get too much coverage, you’ll balk at the cost of being insured. Get too little coverage, and you risk getting wiped out financially should anything ever go wrong.
There are six broad coverages for which you can be insured. Each is priced separately. Your final auto insurance policy rate is the combined cost of each of the coverages below.
1. Coverage for injuries to other people from an accident
When you are responsible for a car accident and cause injuries to other people, the Bodily Injury Liability portion of your auto insurance policy kicks in to pay for the expenses.
Bodily Injury Liability covers medical expenses and doctor’s bills; legal fees in case you’re sued; loss of income because the other person can’t work; pain and suffering awards; and, the cost of a proper funeral.
All states require some form of Bodily Injury Liability. You’re welcome to request the minimum allowable amount for the least expensive coverage available.
Many people request at least a small increase over the minimum Bodily Injury Liability coverage, though, for extra safety and protection.
2. Coverage for large medical bills from an accident
If you’re ever in a car accident, regardless of who’s at fault, your auto insurance policy can cover the initial medical expenses related to the accident.
Using Medical Payments Coverage coverage, your insurance can pay for ambulance rides, an initial hospital stay, and whatever emergency medical care might be needed for you and your passengers.
Medical Payments coverage covers payments that your health insurance will not. It’s an optional coverage for drivers, and often an inexpensive addition to your auto insurance policy.
Drivers with a reliable health insurance policy can usually get by with little or no Medical Payments coverage. With less coverage comes a lower cost.
3. Coverage for damage to someone else’s car, and structures
Car accidents happen when your car hits some other thing — either another car on the road, or a fixed structure such as a light post, or a fence, or a house.
For coverage against damage to other people’s property, add Property Damage Liability coverage to your auto insurance policy.
Property Damage Liability does not cover damage to your own car. It’s only for insurance against damage to others.
Most states require drivers to keep a minimum amount of protection against damage to other people’s property, and to public structures.
Using the minimum amount of protection will keep your insurance costs low. However, it’s a risk to be underinsured in this category. Public structures are expensive to repair, and it’s just as easy to hit a $100,000 car as it is to hit a $10,000 one.
More coverage keeps you safe.
4. Coverage for damage to your car in an accident
When you’re in an auto accident, your car will be damaged.
The damage from an accident could be minor, such as with a broken rear-view mirror or busted bumper. Or, it could be major, leaving your car unable to be driven.
With Collision Coverage added to your auto insurance policy, your insurer will reimburse you for the costs of your car repair. It doesn’t matter whether you were at-fault for the accident, or somebody else was.
Collision Coverage also pays out when the damage from an accident is higher than what your car is worth. When this happens, your insurer just sends a check for the value of your car, which you can use for whatever you want.
As a driver, you can actively manage your Collision Coverage in order to keep insurance rates down. This is because cars lose value over time.
Every six months, then, when your policy renews, check the new, updated value of your car and reduce your coverage to that exact amount.
This way, you’re never insuring your car for more than it’s worth. Less coverage means lower costs.
5. Coverage for random-event damage caused to your car
Sometimes, your car gets damaged from something other than an accident. For example, your car might be damaged in a fire, or by weather, or by falling objects from a tree or building.
For protection against random events like this, you’ll want Comprehensive Coverage.
Comprehensive Coverage on your auto policy is typically inexpensive, and it protects against theft of a vehicle, too.
Comprehensive Coverage is optional for drivers with auto insurance, and it’s a good idea to add it to your policy — especially if you use your car regularly and don’t have emergency funds available for replacing a stolen or damaged car.
Remember to be active with your coverage.
Cars lose their value over time, which means that you can reduce the amount of Comprehensive Coverage you’re carrying every six months when you renew your latest auto insurance policy.
With less coverage required, your auto insurance rates can drop.
6. Coverage against drivers with not enough insurance
Auto insurance coverage is required by law, but drivers often insure themselves as cheaply as they can. Usually, this means skimping on extended coverage options in order to save some cash.
If you are unlucky and get hit by a driver whose auto insurance coverage is too little, your damages will go unpaid. Your bills will be your responsibility. Your car repairs fall to you.
This is why Uninsured and Underinsured Motorist Coverage exists. It’s a special coverage option in your auto insurance policy.
Uninsured and Underinsured Motorist Coverage protects you from runaway medical bills in case you get hit by an inadequately insured motorist; and, pays for your car repairs as well. Although the coverage is optional in most states, it’s a good idea to take it.
Uninsured and Underinsured Motorist Coverage isn’t cheap, but it’s way less expensive than having to pay for your own medical bills and repairs after an accident or hit-and-run.
Even a little bit of Uninsured and Underinsured Motorist Coverage is better than none at all.
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