Basics of auto insurance coverage: An overview

You shouldn’t drive your car without having an auto insurance policy in place. If you get into an accident or your car is stolen, the right type of auto insurance policy can save you from huge financial losses. Auto insurance is essentially an agreement between you and your insurer. You accept to pay the auto insurance premium to the auto insurer. In return, they accept to compensate your covered losses when you make a claim.

Before buying an auto insurance policy, it’s important that you understand the basics of auto insurance coverage. Usually, there are seven principal types of car insurance coverages and they are given below:

Bodily injury liability coverage

This important coverage is necessary in maximum states. It covers injuries that you, the policyholder or designated driver cause to somebody else. It makes payments for loss of income, medical bills, suffering and pain and even funeral expenditures for people who become injured in a motor vehicle accident (given that you’re liable for their injuries). Family members who are named in the policy are also covered while driving anyone else’s car with their approval.

Personal injury protection (PIP) or medical payments coverage

This coverage makes payment for the medical expenses for the injuries to the driver and passengers of the car of the policyholder. At its widest, personal injury protection can cover loss of income, medical bills and the cost of substituting services usually carried out by somebody injured in a motor vehicle accident. It might also cover funeral expenses. Furthermore, PIP would offer protection to you and your family members if you get injured while traveling in someone else’s car.

Property damage liability coverage

This type of coverage makes payments for damages that you (or somebody driving the car with your approval) might cause to somebody else’s property. Normally, this suggests damage to somebody else’s vehicle, but also includes damages caused to telephone poles, lamp posts, fences, houses or other structures. For used cars with book values of $15,000 or more, it is better to have sufficient coverage – adequate to substitute or renovate someone else’s car.

Collision coverage

This coverage offers protection to your vehicle. It makes payments for damages caused to your car because of a collision with another vehicle or object or due to turning turtle. In addition, it covers damages resulting from potholes. Collision coverage is usually marketed with a deductible of $250 to $1,000. The more is your deductible, the less is your premium.

Comprehensive coverage

This coverage compensates for losses resulting from burglary or damages due to anything except a collision with another vehicle or object like fire, earthquakes, falling objects, floods, hailstorms, riots or vandalism. Damages resulting from hitting an animal (like deer or birds) are also covered. Comprehensive coverage also offers coverage without any deductible for transport costs incurred by you in case of a covered loss. Comprehensive coverage would also pay for damages caused to your windshield once the deductible of your policy (if any) is used.

Uninsured and underinsured motorist coverage

This coverage would pay you, a designated driver or your family member if one of you gets injured by a hit-and-run driver who is liable for your injuries. It covers medical and other associated expenses up to the limit of the insurance coverage you choose. Underinsured motorist coverage would reimburse you when the driver responsible for an accident has inadequate coverage to compensate your overall losses. This coverage would also offer protection to you if you’re hit as a passerby.

Car insurance market is full of competition. You should compare rates and coverages from different insurers for selecting the policy that is right for your needs.