Auto insurance can seem confusing. But once you understand the different types of coverages that make up your policy, it’s not difficult at all. Your auto insurance is really a package of eight primary coverages. Taken together, these coverages make up a standard auto policy. Each of these coverages has its own separate premium. Your premium payment is the total of these separate premiums.
- Bodily Injury Liability provides protection if you injure or kill someone while operating your car. It also provides for a legal defense if another party in the accident files a lawsuit against you. Bodily injury liability covers injury to people, not your vehicle. Therefore, it’s a good idea to have the same level of coverage for all of your cars. In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit without jeopardizing your personal assets.
- Personal Injury Protection– This coverage can be found in automobile policies in states that have no-fault provisions in their automobile insurance policies. The coverage protects an insured party for loss from physical injury, loss of income, and so forth, regardless of fault.
- Property damage liability protects you if your car damages someone else’s property. It also provides you with legal defense if another party files a lawsuit against you. It’s a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object.
- Medical payments, no-fault or personal injury protection coverage usually pays for the medical expenses of the injured driver and passengers in your car. There may also be coverage if you’re injured by a vehicle as a pedestrian.
- Uninsured motorists coverage pays for your injuries caused by an uninsured driver or, in some states, a hit-and-run driver, in an accident that is not your fault. In some states, there’s also uninsured motorist coverage for damage to your vehicle. Given the large number of uninsured motorists, this is very important coverage to have, even in states with no-fault insurance.
- Comprehensive physical damage coverage pays for losses resulting from incidents other than collision. For example, comprehensive insurance covers damage to your car if it is stolen or damaged by flood, fire, or animals. To keep your premiums low, select as high a deductible as you feel comfortable paying out-of-pocket.
- Collision coverage pays for damage to your car when your car hits, or is hit by, another vehicle or other object. To keep your premiums low, select as large a deductible as you feel comfortable paying out-of-pocket. For older cars, consider dropping this coverage, since coverage is normally limited to the cash value of your car.
- Rental reimbursement coverage pays for a rental vehicle (usually up to $25 a day) when the insured’s vehicle is out of commission as a result of a loss covered under comprehensive or collision coverage.
- Towing and Labor coverage typically helps cover the cost of a tow truck or roadside services for your vehicle when it becomes disabled.