AUTO INSURANCE 101:
WHAT YOU NEED TO KNOW
If you own a car, auto insurance isn't just an option; it's a legal necessity, according to the Insurance Information Institute.
When you're suddenly involved in an accident or become a victim of car theft, owning the right kind of auto insurance can help to ease a difficult situation. How? By providing you the financial means necessary to repair or replace your automobile and/or get emergency medical attention if you need it.
That's valuable peace of mind you wouldn't want to live without!
Auto Insurance: Just the Basics
To get the right insurance at the right price, you need to know your options.
A basic policy may include up to six different coverages. Following is an elementary explanation of each:
• Bodily Injury Liability
This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else's car with their permission.
It's very important to have enough liability insurance because, if you're involved in a serious accident, you may be sued for a large sum of money. Consider buying more than the state-required minimum to protect assets such as your home and savings.
• Property Damage Liability
This coverage pays for damage you (or someone driving the car with your permission) cause someone else's property. Usually, this means damage to someone else's car; but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hits.
• Medical Payments or Personal Injury Protection (PIP)
This coverage pays for treatment of your injuries in an accident, as well as those incurred by your passengers. PIP can sometimes cover other injury-related expenses you encounter, too, such as medical payments, lost wages and the cost of replacing services you or your injured passengers would normally perform. It may also cover funeral costs.
• Uninsured and Underinsured Motorist Coverage
This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.
Underinsured motorist coverage kicks in when an at-fault driver has insufficient insurance to pay for your total loss. This coverage also offers protection if you are hit as a pedestrian.
• Collision
This coverage pays for damage to your car resulting from a collision with another car or object, or as a result of flipping over. It also covers damage caused by potholes.
Even if you are at fault in an accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver's insurance company. If they are successful, you'll also be reimbursed for the deductible.
Collision coverage is generally sold with a deductible of $250 to $1,000. The higher your deductible, the lower your premium.
• Comprehensive
This coverage reimburses you for loss due to theft, or for damage caused by anything other than collision. Includes such things as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism or riot.
Comprehensive will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.
This type of insurance is usually sold with a $100 to $300 deductible. However, you may want to opt for a higher deductible to lower your premium.
Collision and comprehensive coverage are not typically required, but if you have a car loan, your lender may insist you carry it until your loan is paid off.
Each state determines its own auto insurance requirements individually, so be sure to check with your state's department of insurance before finalizing your auto insurance policy. (To find out what your state requires, click here .)
Keeping Costs Down
The price you pay for auto insurance can vary by hundreds of dollars, depending on your driving record, the type of car you drive and the insurance company you buy your policy from.
But you don't have to spend an arm and a leg to get great auto insurance protection. To maximize savings, take these tips to heart:
- Drive safely
- Comparison shop, comparing several quotes
- Set deductibles as high as you can comfortably afford
- Don't drink and drive
- Inquire with your auto insurance company about discounts such as multiple-auto or multiple-policy
- Find out what insurance will cost before you buy a car
- Make your payments on time to keep your credit score high
Doing the Right Thing
Auto insurance is a vital security all drivers need, for their own protection and that of others.
So don't risk breaking the law or leaving yourself defenseless. Find out your state's requirements, get educated-and buy auto insurance today!