The key to getting affordable and adequate car insurance protection is by simply knowing what different kinds of coverage are listed in your policy. Some of the coverage may be required by your state while others may be required by the lending company or banks. A basic understanding of the different types of coverage can help you decide what to include and what not include in your car insurance policy.
Simply relying on your car insurance agent is not enough if you are serious about cutting your auto insurance costs and getting cheap car insurance. While the insurance agent will try his best to help you, the final decision of choosing what kind of coverage to take is in your hands.
A lot of car owners waste a lot of money on purchasing a coverage that they do not really need because they have no idea what that coverage is for.
Know the different kinds of auto coverage
Each state has its own rules and requirements with regards to what kind of coverage are to be included in your car insurance policy. If you simply want to get the minimum state requirement, you can contact and ask your car insurance agent or the local department of motor vehicles. The most common and known types of car insurance coverage are the following:
1. Liability Coverage
This is the most common type of car insurance coverage since almost all the states include it as part of the minimum car insurance requirement. Liability coverage will help pay for the personal injuries and the property damages suffered by the other party. In case you got involved in a vehicular accident in which the authorities find you as the one at fault, liability coverage can help you. This particular coverage can provide you with some form of financial and legal protection depending on the amount of your coverage. Although most states require a minimum coverage amount, it is financially prudent to get a coverage amount above the minimum. Vehicular accidents are getting more expensive these days and the minimum coverage amount is not always enough. If the liability coverage is not enough to pay for the costs of the accident then the party at fault is personally liable for the deficit. Bear in mind that the liability coverage only covers the other party not the insured or passengers of the insured vehicle.
Bodily injury liability and property damages
Liability coverage normally covers bodily injury and property damages. These two components are virtually inseparable since both are part of the minimum auto insurance requirement of most states. Coverage from bodily injury will pay for any personal injuries suffered by the innocent party in a vehicular accident caused by the insured. Coverage from property damages will compensate the innocent party for the repair or even replacement of the vehicle damaged or destroyed by the vehicle owned by the insured.
2. Personal Injury Protection
More popularly known as PIP but also sometimes known as MEDEX, this coverage will compensate the insured for any personal injuries he or she might be sustained regardless of the party at fault. Aside from the policyholder, this coverage can also include the policy holder’s family living in the same household, authorized drivers and passengers at the time of the accident. The policyholder and family are still covered by PIP even if they are driving or riding somebody else’s car. In some states, even as pedestrians, the policyholder and family can still claim compensation from PIP for any personal injuries they might be sustained in the event that they are hit by a vehicle while crossing or walking on the streets. The PIP will pay for the medical bills and even reimburse the insured for the salary lost during the accident and recuperation. As a result of the accident, you have to hire somebody else to the work that you normally do, the PIP plan can reimburse you. In the unfortunate event that the insured dies as a result of the accident, compensation will also be given to cover the costs of the funeral.
3. Collision Coverage
This coverage will compensate for any repairs or replacement needed by the insured’s car as a result of a vehicular accident regardless of which party is at fault. Banks and lending companies usually require the inclusion of this coverage in the insurance policy before approving the car loan. Owners of new cars can benefit from this coverage but owners of older cars may consider not getting collision coverage at all since the amount of coverage is limited to the car’s cash value.
4. Comprehensive Coverage
This coverage will compensate the insured for repair and even replacement of the car that is caused by an event other than a vehicular accident. Besides vehicular accidents, car owners also faced other risks such as having their cars stolen or vandalized, fire and other natural disasters. This coverage is meant to address those dangers. However, most comprehensive coverage excludes damages caused by earthquake, flood or owner’s negligence unless specified. A car obtained through a loan from a bank or lending company is usually required to carry comprehensive insurance coverage during the loan period. Owners of cars that are still relatively new or in good running condition may consider getting this kind of coverage. But if you own an old car or if the car is in poor condition, taking this coverage is not advisable.
5. Uninsured & Underinsured Coverage
This kind of coverage will help pay for the medical treatment of the bodily injuries sustained by insured and passengers and repairs or replacement costs of the vehicle in case the motorist at fault does not have enough insurance or no insurance at all to pay for the costs of the vehicular accident. This coverage also applies in situations where the driver who caused the accident fled, leaving the insured at the scene of the accident. This coverage not only includes the insured but also any authorized driver covered by the policy and passengers at the time that the accident occurred.