We all want to save money and do things the most affordable way. But when it comes to car insurance shopping, we need to make sure that we buy the right protection because that can save us lots of money and trouble in the long run! However, we also need to make sure we are not purchasing coverage options that we do not need, or that are not worth the money. Take a minute to learn about the basic options on your policy so you can be prepared to shop for the best possible coverage!
- Bodily injury liability: Covers injury and death claims against you, and legal costs, if your car injures or kills someone.
- Property damage liability: Covers claims for property that your car damages in an accident. Because liability coverage protects the other party, it is required in all but three states.
- Medical payments: Pays for injuries to yourself and to occupants of your car. This is optional in some states. In “no-fault” states, personal injury protection replaces medical payments as part of the basic coverage.
- Uninsured motorist protection: Covers injuries caused to you or the occupants of your car by uninsured or hit-and-run drivers. “Under-insured” coverage also is available, to cover claims you may make against a driver who has inadequate insurance. In some states, as many as 30 percent of drivers are uninsured.
- Collision coverage: Covers damage to your car up to its book value. Collision coverage carries a deductible, which is the amount per claim you have to pay before the insurance takes effect. The lower the deductible, the higher the premium. While it is legally optional, a lending institution or leasing company usually requires collision coverage.
- Comprehensive (physical damage): Covers damage to your car from theft, vandalism, fire, wind, flood, and other non-accident causes. Comprehensive also carries a deductible.
We usually refer to the first two as liability insurance, and that is the minimum coverage we need to drive legally in most states. Every US state requires a proof of financial responsibility in order to drive a car, and that is usually satisfied in this way.
The other types of coverage may not be required by the law, but collision coverage may be required by a lender if you still owe money on your car. In any case, if you cannot afford to pay for property and medical damage for yourself and passengers, it would be prudent to have some coverage!
