What’s in Your Auto Insurance Policy?
Some people consider auto insurance one of those necessary evils; a burden of an expense and required by law, but it becomes a rescuing cavalry when an accident happens. But when you buy car insurance do you know what you’re getting? If you don’t ask questions or are prudent in choosing the specific options you need you may be overpaying for unnecessary options.
Auto insurance is designed to protect you financially in case your car is damaged and needs repair or replacement, or if you become liable in a negligence lawsuit due to an accident or collision caused by you. With that high-level overview said, there are many options that may be included in an insurance policy that affect the amount you pay for premium each month and the amount of benefit you might receive when you make a claim.
A car insurance policy should contain at least the following coverages:
- Liability
- Collision
- Comprehensive
- Medical or Personal Injury Protection (PIP)
- Uninsured/Underinsured Motorist
Liability coverage is required in all but two states. Due to the litigious society we live state lawmakers have deemed liability coverage to be absolutely necessary for any automobile on the road. This important coverage will pay for damages and/or injury you may cause others due to an accident where you are at fault. And should you ever face litigation or a trial an insurer will pay for legal counsel, court costs, and an amount of judgment, if any, up to a certain limit.
Collision coverage will pay for repairs to your car caused by an accident or collision. If your vehicle is totaled beyond repair it will then pay you for the cash value of your vehicle so you may purchase a new car. You can manipulate the cost of collision coverage by choosing a deductible amount. A higher deductible means you pay less in premiums, but choose to take on more financial risk if an accident occurs. A lower deductible results in higher premium, but you save money in your pocket when an accident occurs.
Comprehensive is similar to collision in that it pays for repair or replacement of your vehicle, but in the case of damage caused by natural disaster, theft, or vandalism. Also like collision coverage, you can choose a deductible amount on your policy.
Medical and PIP coverage is important if you or someone else is injured in an accident. Medical bills for emergency care and possible surgery and rehabilitation can be astronomical. With this coverage you are covered.
Uninsured motorist coverage helps protect you in the case that someone else causes an accident with your car and does not have adequate or any insurance whatsoever. Most banks that finance cars will require this coverage.
Insurance companies will try to slip other types of coverages into a new policy, some that you may not even need. These coverages may be considered “luxury” coverages or optional protection:
- Uninsured/Underinsured Motorist
- Rental Reimbursement
- Roadside Assistance
- 24 Hour Towing Assistance
When you shop for car insurance be sure to check your quotes for the details of coverages included. Remember to choose a deductible amount that you will be comfortable paying if an accident should occur. And ask to remove any coverages you feel are not necessary or required by your financing company
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