Car Insurance for Dummies: The Basics Explained
Buying car insurance can be daunting if you don’t understand the basic elements of insurance. Most insurance providers offer a wide variety of options for your coverage, and it is important to understand what they are. After reading this article, you should be able to buy auto insurance with a lot more confidence.
Liability coverage protects you when you do damage to other people or their property. This coverage is usually expressed as three numbers, like 30/50/15. In this example, you would have $30,000 in bodily injury insurance per person, $50,000 in bodily injury insurance per accident, and $15,000 in property damage insurance per accident. This is how much the insurance company will pay on your behalf if you cause damage to others. This is the basic element of insurance and almost every state requires a certain amount. Liability insurance can also often pay for your legal bills in case of an accident.
This insurance will only cover you up to your limit. If you cause $25,000 worth of property damage, our above example would only cover the first $15,000, which would leave you responsible for the remaining $10,000.
Collision and Comprehensive Insurance:
This type of insurance covers your own vehicle. Collision insurance can pay for any damage that you happen to cause to your own car. Even if you completely total your car, your insurance company can reimburse you for the cash value of the car. An important part of this coverage is the deductible. The deductible is how much money you must pay out of your pocket before the insurance takes over. For example, if your deductible is $500 dollars and your car sustains $6000 worth of damage, then you would be responsible for paying the first $500, and then the insurance company would pay the remaining $5500. Generally, the higher your deductible is, the lower your monthly payments will be.
Comprehensive Insurance is for damage that occurs by events other than an accident. This could be a fire or a theft or vandalism. This coverage is provided in much the same way with a deductible. Collision and Comprehensive Insurance are almost always optional.
Medical Payments and Personal Injury Protection:
This type of insurance will pay for your medical bills if you or your passengers are injured in an automobile accident. Personal injury protection will sometimes also pay for other things, such as lost wages due to injury, or funeral costs. Usually, Personal Injury Insurance is optional, but some states require it. If you have health insurance, it may already cover some of these things, so you may decide you don’t need it.
Uninsured Motorist Protection:
This can protect you if you get into an accident in which the other driver is uninsured. It can also protect you if you are the victim of a hit and run driver. Even if the other driver does have insurance, he might cause more damage than his insurance covers. In this case, your Uninsured Motorist Protection can kick in and pay for the balance. Some states require this protection.
Those were the basics of car insurance. The next time you head to the insurance office, you should be informed enough to choose an insurance plan that fits your needs.
Photo via Akinori YAMADA