Auto insurance is one of those necessary evils in life that everyone hates, until they need it. It is often expensive, and generally more complicated than most people feel that it should be. However, if we look beyond the high fees and complexities of auto insurance, it becomes easy to understand the need for, and the value within it.
In this article, we will break auto insurance plans down into their six separate elements and discuss each one individually so you are better equipped to decide what features you would like.
1. Bodily Injury Liability
Most states require that your auto insurance policy include liability coverage. There are typically coverage minimums associated with this requirement, which must be maintained. This makes sense. If you are involved in an accident in which you are at fault, the expectation is that your insurance policy will cover the cost of any repairs or medical expenses incurred as a result of you.
Liability coverage is separated into two different parts, the first of which is bodily injury liability. This is the part of your auto insurance policy that will cover medical expenses or any other costs associated with injuries sustained if you should cause an accident.
2. Personal Injury Protection (PIP)
PIP is a requirement in 15 states and optional in seven, but is not available in the rest of the country. PIP works similarly to bodily injury liability in that it will assist with medical bills due to injury. However, PIP will extend deeper to cover other expenses incurred as a result of your causing an accident, such as loss of income.
3. Property Damage Liability
This is the other half of your liability coverage and is the part of your auto insurance policy, which covers the cost of repairing property belonging to others that you damaged as a result of the accident. Property damage liability will cover the cost of repairing other automobiles, street signs, buildings, or anything else that may have been damaged.
4. Comprehensive
Comprehensive insurance can be confusing for some people. This is the part of your policy that may cover your vehicle in the case of such things as theft, flood, fire, or vandalism. Your vehicle may be repaired or replaced by your insurance company should you encounter any such situation. The confusing part of this type of insurance stems from the deductible that is generally required. The deductible is the amount you are required to put towards repairs or replacement, typically between $100 and $1,000, before your insurance company releasing the remainder of the funds.
The amount of your deductible will impact the overall cost of your auto insurance policy. The higher your deductible is, the lower the cost of your plan, and vice versa.
5. Collision
This is another variant which can sometimes be difficult to understand, as it is different from both liability and comprehensive insurance. Collision is what covers your vehicle should you be involved in an accident with another vehicle, or if you hit a stationary object, such as a mailbox or a fence. Though different, collision works much the same as comprehensive with regards to the deductible. Collision coverage is generally not required by states. However, it may be a requirement imposed by the lienholder of your vehicle. Should your car be stolen or totaled by damage, the bank will want to recover the money it lent you to purchase it.
6. Uninsured and Underinsured Motorist
If you are involved in an accident through no fault of your own, and the other driver does not have insurance of their own, this is the part of your policy that will cover repairs or other expenses which you may incur. An underinsured driver is a driver who does, in fact, have insurance on their vehicle. However, the liability limits carried by their policy are not enough to cover the vehicle repairs, medical bills, or other expenses which you may incur as a result of the accident.
Some states require uninsured and underinsured motorist coverage, while others do not. It is best to consult your insurance provider to determine the requirements in the state you live in.
Get the Coverage You Need, and Understand What You Are Paying For
Your auto insurance policy shouldn’t be a mystery, or require an interpreter to decipher. It should be fairly straightforward and relatively easy to understand. Make sure you are meeting the coverage requirements of your state, and your lienholder, and know exactly what you are paying for.
Auto insurance is one of those necessary evils in life that everyone hates, until they need it. It is often expensive, and generally more complicated than most people feel that it should be. However, if we look beyond the high fees and complexities of auto insurance, it becomes easy to understand the need for, and the value within it.
In this article, we will break auto insurance plans down into their six separate elements and discuss each one individually so you are better equipped to decide what features you would like.
1. Bodily Injury Liability
Most states require that your auto insurance policy include liability coverage. There are typically coverage minimums associated with this requirement, which must be maintained. This makes sense. If you are involved in an accident in which you are at fault, the expectation is that your insurance policy will cover the cost of any repairs or medical expenses incurred as a result of you.
Liability coverage is separated into two different parts, the first of which is bodily injury liability. This is the part of your auto insurance policy that will cover medical expenses or any other costs associated with injuries sustained if you should cause an accident.
2. Personal Injury Protection (PIP)
PIP is a requirement in 15 states and optional in seven, but is not available in the rest of the country. PIP works similarly to bodily injury liability in that it will assist with medical bills due to injury. However, PIP will extend deeper to cover other expenses incurred as a result of your causing an accident, such as loss of income.
3. Property Damage Liability
This is the other half of your liability coverage and is the part of your auto insurance policy, which covers the cost of repairing property belonging to others that you damaged as a result of the accident. Property damage liability will cover the cost of repairing other automobiles, street signs, buildings, or anything else that may have been damaged.
4. Comprehensive
Comprehensive insurance can be confusing for some people. This is the part of your policy that may cover your vehicle in the case of such things as theft, flood, fire, or vandalism. Your vehicle may be repaired or replaced by your insurance company should you encounter any such situation. The confusing part of this type of insurance stems from the deductible that is generally required. The deductible is the amount you are required to put towards repairs or replacement, typically between $100 and $1,000, before your insurance company releasing the remainder of the funds.
The amount of your deductible will impact the overall cost of your auto insurance policy. The higher your deductible is, the lower the cost of your plan, and vice versa.
5. Collision
This is another variant which can sometimes be difficult to understand, as it is different from both liability and comprehensive insurance. Collision is what covers your vehicle should you be involved in an accident with another vehicle, or if you hit a stationary object, such as a mailbox or a fence. Though different, collision works much the same as comprehensive with regards to the deductible. Collision coverage is generally not required by states. However, it may be a requirement imposed by the lienholder of your vehicle. Should your car be stolen or totaled by damage, the bank will want to recover the money it lent you to purchase it.
6. Uninsured and Underinsured Motorist
If you are involved in an accident through no fault of your own, and the other driver does not have insurance of their own, this is the part of your policy that will cover repairs or other expenses which you may incur. An underinsured driver is a driver who does, in fact, have insurance on their vehicle. However, the liability limits carried by their policy are not enough to cover the vehicle repairs, medical bills, or other expenses which you may incur as a result of the accident.
Some states require uninsured and underinsured motorist coverage, while others do not. It is best to consult your insurance provider to determine the requirements in the state you live in.
Get the Coverage You Need, and Understand What You Are Paying For
Your auto insurance policy shouldn’t be a mystery, or require an interpreter to decipher. It should be fairly straightforward and relatively easy to understand. Make sure you are meeting the coverage requirements of your state, and your lienholder, and know exactly what you are paying for.
