Car Insurance Policy Basics

It can be difficult to find car insurance. It’s important to understand the differences between coverage types before you buy a policy.

You should be familiar with the three components of auto insurance coverage before you shop for it. Each component accounts for a portion of your car insurance premium. It may seem tempting to just find cheap car insurance. However, it is a better choice to ensure that you and your vehicle are properly protected.

Three Types of Basic Coverage

Liability is this part of your car insurance policy must be purchased. It protects you in the event that you are responsible for an accident. Not only could you be held responsible for the damages caused to another vehicle, but also for any medical expenses, lost wages and pain and suffering suffered by anyone else. Limits on liability can be measured in thousands, sometimes hundreds of millions of dollars. Example: “50/100/25” is $50,000 for bodily injury coverage, $100,000 for total coverage, and $25,000 for property damages.

This coverage covers repairs to your vehicle or the replacement of its value if it is totaled in an accident. You may not be as well off if your car is older.

This coverage covers the cost of repairs or replacement for your car in case it is stolen, damaged by fire, flood, or high winds. This coverage may not be necessary if your car is older.

Each of the collision and comprehensive sections of your insurance policy, which together make up 40 percent of your premium, have a deductible that you must pay before your insurance kicks in for each claim. If you have a $500deductible and lose $1,00, then your insurance will not cover the loss.

You may also be covered for medical expenses, regardless of fault, and uninsured motorist coverage in the event your car is damaged by an uninsured driver. Many policies offer cheaper add-ons like rental reimbursement, in case your car becomes unusable due to an accident, and towing insurance.

What’s Required?

Although almost all states require drivers have liability insurance, some states only require coverage of $15,000 to $25,000. It doesn’t matter how much liability insurance you require, it is wise to have coverage limits that cover at least $100,000 per person and $300,000.00 per accident. Lower limits might not be enough. According to the Insurance Information Institute in recent years, the average personal injury award for such cases was $323,000. It is worth considering at least $50,000 of property damage liability coverage. Although the state limit may be lower, expensive cars can still get damaged quickly.

You can reduce your car insurance premium by increasing your collision and comprehensive deductible. Your auto insurance bill can be cut by increasing your deductible from the $200 limit or $250 limit to $500. You should weigh the savings against the increased out-of-pocket costs. You should choose the lower deductible if you can afford it.

You may be eligible to get collision and comprehensive coverage if you own an older vehicle. This option is available for cars older than five years. If the car isn’t worth it, it doesn’t make sense to pay high car insurance premiums. Any payouts will only be based on the car’s market value. Keep in mind that collision and comprehensive coverage should not exceed 10 percent of the vehicle’s retail value.

Most states require uninsured/underinsured motorist coverage, which is often $20,000 to $40,000 in protection. This will protect you and your passengers from injuries caused by drivers who don’t have insurance or lack sufficient coverage. You are also protected if an uninsured driver hits you while you are riding a bike or walking. It’s possible to purchase $100,000 of coverage for $50 per year. However, it is usually worth paying a little more to get additional coverage.

You may be able save money on your medical payments coverage. This coverage, regardless of fault in an accident will pay for doctor and hospital bills and sometimes funeral expenses for you and your passengers. Before you decide to decline medical payments coverage, make sure to check if your life insurance and health insurance could cover these expenses. This option can be avoided if you have the right to do so. It could save you up to $100 per year.