Auto insurance can be confusing. What in the world is Comprehensive? Collision? Liability? All of these terms are so general in the real world that it is difficult to know their applied value within the auto insurance world. This article will help you set the record straight and get you thinking about what you need and don’t need when it comes to auto insurance.
Whenever you have a thousand-plus-pound piece of metal going down the freeway at 65 miles per hour, it’s always a good idea to let it sink in how much damage can be done . . . not only to property but to people. As with other types of insurance, it is always better to have slightly higher coverage than underinsure. At the same time, you want to keep your expenses down, and I’ll teach you a few ways to do that.
What are the different types of auto insurance coverage available?
Here are some definitions and tips on how much coverage to have:
- Liability: Liability car insurance can be split into two types: liability to other’s bodily injuries and liability to other’s property. If you were to hit a pedestrian and you were legally liable for the accident, you may be sued by the victim or family for their bodily injuries. Liability car insurance covers this claim against you.
- Liability Bodily Damage: This covers you if you cause bodily injury to others. Many insurance companies will tempt you to buy a $50,000(per person)/$100,000(per accident) policy. But, for only about $50 to $150 more every six months, you can get coverage that far exceeds previous offers. This extra amount can pull in a $100,000/$300,000 policy. You might even want to go for a policy that is $100,000/$500,000. That, my friends, is seriously inexpensive insurance. If a person has bodily injury from your negligent behavior (it happens to the best of us), expect that they will sue. This little extra payment will cover you 2-5 times more than if you stuck with the suggested policy.
- Liability Property Damage: This covers you if you are responsible for destroying another person’s property. I recommend $50,000+. $50,000 should cover any building or car you hit. However, you may want to raise it higher than $50,000. It’s a great idea if you can afford it. This is usually built in with your other liability insurance coverage, so make sure you consider your bodily injury coverage with your property damage coverage when making a decision.
- Uninsured/Underinsured Motorist: Pays for bodily injury to you and any passengers in your vehicle if someone else is legally liable for damages. You can simply match this to the coverage you have for Liability Bodily Damage.
- Uninsured Motorist Property Damage: Offered in some states, this covers any damage sustained to your vehicle by another vehicle of an uninsured motorist. Ask your insurance company what they typically recommend, as it is usually bundled in with the insurance package.
- Personal Injury Protection: This is to protect you if you get injured in an accident, regardless of who is at fault. Usually, Liability Bodily Damage would cover you if the other person is liable if they are insured. I have personally chosen to go with basic protection ($15,000 of coverage) for my policy at this time.
- Comprehensive: Generally important to have for most people. This covers any loss or damage caused by an event other than collision. This can include fire, theft, windstorm, flood, and vandalism. I recommend this for most people unless you are already wealthy and could write a check to cover the loss of your vehicle. Even for those who could cover this loss out of pocket, comprehensive is a great buy. If you’re trying to save up money rapidly, you can raise your deductible (only just under the amount your emergency fund could cover) to lower your premium. This will shave off a lot of expense.
- Collision: Not as necessary as Comprehensive, Collision covers damage to your vehicle when it collides with another object or overturns. Collision can be pricy, which is why many people don’t take this type of coverage if the value of their vehicle doesn’t justify the expense. Weigh out your options on this one.
- Roadside Assistance: If you’re not car savvy like myself, you may want to consider roadside assistance. The cost is generally low, and can be justified.
Any tips for choosing an insurance provider?
You want to choose a provider that you will have access to 24/7. You never know when you’ll have to make a claim, or need to update your policy. I have found online providers to be especially responsive, with Progressive doing a great job of providing me prompt service.
It’s not always about speed though. Some people should sit down with an insurance agent one-on-one to discuss their insurance options. Quality matters as well, so be careful when using an online insurance provider.
It’s a fine balance between being covered and saving money. Remember to go over each piece of your insurance policy slowly and carefully. You’ll come out better in the end. Also, remember to build up your emergency fund so that you can cover any deductibles that you’ll have to meet.
What auto insurance provider do you have? What is your experience with them? Have you found any ways to save yourself some money?
“Insurance Essentials: Auto Insurance” is part of a series on Insurance Essentials: An Introduction To Insurance You Need! I encourage you to read more articles on insurance. I’d also appreciate your comments below so that I might improve this article accordingly. Thank you for your help!
! John wrote two articles for the book: "Budgeting for Groceries" and "How Grocery Stores Work."
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