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If you have a car, it’s likely you don’t have a choice about whether you want insurance: many states require some sort of coverage. However, you should probably go beyond these minimal requirements to protect yourself and your family in case of an accident. This article will explain the various items that make up your auto insurance policy, and how much coverage should be enough for your needs. Liability Coverage If you’re in an accident, this shields you from liability you might face from the other party/parties in an accident. It’s split into two areas – bodily injury, which covers medical bills, loss of income, funeral expenses, and assorted legal expenses. If you don’t have sufficient liability coverage, you might be forced to dip into your savings to pay off big bills from any lawsuit resulting from an accident. The other liability coverage is property damage. This covers damage to physical property like homes and storefronts, and vehicle repair or replacement costs for the other party in the accident. Vehicle Protection Damage to your vehicle is covered under this area, which, like liability, is split into two areas. The first is collision, which pays for repairs or replacement of your vehicle because of an accident, up to your car’s actual cash value (which is the car’s value after accounting for depreciation and wear and tear). Comprehensive coverage accounts for damages to your car for things other than accidents. This includes storms and vandalism, or a broken windshield or hitting an animal on the road. Other coverages: Underinsured/Uninsured Motorist Coverage covers you in the event you’re in accident with another motorist with no insurance or very little insurance. Medical payments coverage: If you’re in a covered accident, this pays for medical expenses for yourself or your family that may result from the accident. Personal Injury Protection: This helps cover medical expenses, as well as any loss of income or child-care expenses you might incur while healing from an accident. So What Does It Cost? To determine your premium, first determine the coverage limit. The higher your coverage limit, the more you pay in premium. If you lower your coverage limit, you’ll play less in premium, but you’ll pay more out of pocket later if you’re ever in an accident that exceeds the coverage limit. Another way to lower your premiums is to increase your deductible. A deductible is the amount you pay if you make a claim for an accident. If you have a higher deductible, you have a lower premium. If you do this, be sure you have enough money on hand to cover the deductible amount. For example, if your car requires $2,000 in repairs after an accident and your deductible is $500, you will have to pay $500 out of pocket, and the insurer will pay the rest, $1,500. Other ways to lower your premium – safe driving, avoiding traffic tickets and accidents; if your covered children have good grades, this can also reduce the premium. Shop Around The other way to cut your costs is to shop around for quotes. The Internet makes it easy to get multiple quotes for auto insurance, and you can tweak the various coverage and deductible levels to see different premium options. However, always keep the ‘worst-case’ in mind, to ensure you have enough coverage, and be sure the deductible amounts you have chosen match what you can reasonably be expected to pay if you have a claim. |