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AUTO INSURANCE BASICSAn auto insurance policy is a package of different coverages. Most states require you to purchase a minimum amount of certain kinds of coverage. But if you're interested in protecting yourself from a lawsuit or from hefty repair bills, then it makes sense to buy more than what's required.
Liability insuranceLiability coverage (often simply called "liability") protects you from damage you do to others or to property in an accident. Some level of auto liability insurance coverage is required in all 50 states.Car insurance liability coverage is typically made up of 3 separate components wrapped up under the "liability coverage" heading.
When shopping for or reviewing auto liability insurance coverage, you might see all 3 components lumped together, like this: $50,000/$100,000/$50,000. What's most important is understanding what each liability component protects. Note, too, that you generally can't buy just 1 or 2 liability coverage "pieces." Bodily injury liability coverage protects you if you're responsible for an accident that hurts another person, covering their injuries and lost wages. Keep in mind, though, that liability car insurance is for injuries to other people - coverage doesn't apply to your own injuries. Property damage coverage covers damage you cause to somebody else's property - things like their car or mailbox, or even their house or storefront. Again, it doesn't apply to damage caused to your own property. Bodily Injury Liability Coverage If people are injured in an accident that's your fault, Bodily Injury Liability coverage helps protect you from bills that can include:
Property Damage Liability Coverage If another driver's property is damaged in an accident that's your fault, Property Damage can help pay for their:
Collision and comprehensive coveragesIf you cause an accident, collision coverage will pay to repair your vehicle. You usually can't collect any more than the actual cash value of your car, which is not the same as the car's replacement cost. Collision coverage is normally the most expensive component of auto insurance. By choosing a higher deductible, say $500 or $1,000, you can keep your premium costs down. However, keep in mind that you must pay the amount of your deductible before the insurance company kicks in any money after an accident.
Insurance companies often will "total" your car if the repair costs exceed a certain percentage of the car's worth. The critical damage point varies from company to company, from 55 percent to 90 percent. Comprehensive coverage will pay for damages to your car that weren't caused by an auto accident: Damages from theft, fire, vandalism, natural disasters, or hitting a deer all qualify. Comprehensive coverage also comes with a deductible and your insurer will only pay as much as the car was worth when it got wrecked. Because insurance companies normally will not pay you more than your car's book value, it's helpful if you have a rough idea of this amount. Check the Kelley Blue Book or the National Automobile Dealers Association. If your car is worth less than what you're paying for the coverage, you're better off not having it. Medical payments, PIP, and no-fault coveragesMedical payments (MedPay) coverage will pay for your and your passengers' medical expenses after an accident. These expenses can arise from accidents while you're driving your car, someone else's car (with their permission), and injuries you or your family members incur when you're pedestrians. The coverage will pay regardless of who is at fault, but if someone else is liable, your insurer may seek to recoup the expenses from him or her.
Personal injury protection (PIP) and broader "no-fault" coverages are expanded forms of medical payments protection that may be required in your state. Some states have optional PIP or no-fault coverage. Expanded features include payments for lost wages and child care. Uninsured/Underinsured motorists coveragesUninsured motorists (UM) coverage pays for your injuries if you're struck by a hit-and-run driver or someone who doesn't have auto insurance. It is required in many states.
Underinsured motorists (UIM) coverage will pay out if the driver who hit you causes more damage than his or her liability coverage can cover. In some states, UM or UIM coverage will also pay for property damages. You'll probably want to have at least the minimal amount of UM/UIM because if you can't find the other driver, you'll at least have some coverage for pain-and-suffering damages. Add-on featuresSeveral supplemental auto coverages are available, either as separate premium items or included in augmented policies.
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