Auto Insurance 101: The Basics
Auto insurance isn’t just a good idea – it’s required in most states. Car insurance provides financial protection and greater peace of mind for drivers if your car is damaged or you cause damage with your car. With 10 million car accidents every year, the likelihood you’ll need car insurance at some point is pretty high. Even if you are a meticulous driver, there are many factors beyond your control that your car insurance can help protect you from – be it a fallen tree or a reckless driver behind you.
What is auto insurance?
Car insurance provides you with financial protection to protect you from the costs of an accident. Auto insurance comprises six different coverages. However, not all of these coverages may be mandated by your state. They include: liability, bodily injury liability, property damage liability, personal injury protection, collision, comprehensive, and uninsured/underinsured motorist coverage. Ideally, you would get a policy that offered all of these to be best protected. Depending on your circumstances, some coverages may not be necessary. Speaking with a licensed insurance agent can help you determine what kinds and how much you need.
The six coverages combined help to protect your property, liability and health should you get in an accident or your car is damaged. Each of these coverages offers specific and important protections:
Liability – provides financial protection for damages for which you are found legally liable.
Bodily Injury Liability – provides financial coverage for injuries, including fatal injuries, where you are found at fault.
Property Damage Liability – provides financial protection for damages your car causes to someone else’s property.
Personal Injury Protection – covers costs of medical treatments and wages lost due to injuries your or your passengers sustained in your car.
Collision – Covers damages from accidents with another vehicle or objects.
Comprehensive – Covers damages caused by perils and objects that are not collisions or other cars on the road.
Uninsured/Underinsured Motorist Coverage – provides financial protection if the other driver is found at fault but does not have enough insurance to cover damages.
How much do I need?
Your state has a minimum amount of coverage that you are required to have, but think of this minimum as a starting point. For most people, the minimum amounts required are too low to provide adequate financial protection in the event of an accident or damage (hence the underinsured motorist coverage option!). Though you may be tempted to purchase just the minimum, you should speak with an agent to determine if your situation needs more protection.
There are several factors that should influence the amount of car insurance you should choose – the worth of your car, your assets and your overall risk tolerance. Your liability and medical coverages should be enough to cover your assets, so they cannot be taken away from you if you are found liable for costly damages or
Price is important to most car insurance shoppers, so when you are choosing your car insurance coverage you should be sure to also consider if you are eligible for any discounts and thoughtfully choose your deductible. An agent can help walk you through the many discounts an underwriter may offer, be it a discount for driving safely, donating to charity or bundling your car insurance with another policy like renters or homeowners.