11 JanAuto Insurance Made Easy
There are literally hundreds of different insurance companies offering numerous types of policies through thousands of agents and since no two policies or companies are alike, the mix of coverages, pricing, exclusions, and custom featuers can be overwhelming to say the least.
At the end of the day, the number one most important thing to know about auto insurance is that it is an ‘a la carte’ policy made up of a bunch of different coverage options. The second most important thing to know is that your package of coverage options needs to meet your state’s minimum auto insurance requirements for each type of coverage. And each state has different minimums that need to be met.
Generally speaking, the only ‘requirement’ of auto insurance is that it maintains the minimum limits of personal automobile liability set into law by the state that the vehicle is garaged in. These vary from state to state and this ‘automobile liability’ is to ensure that you, as a driver, have at least a minimum amount of insurance to provide for the medical bills and property damage suffered by any other party in an accident for which you are at-fault. This liability has nothing whatsoever to do with repairing your vehicle or paying for the medical bills suffered by you as the driver.
What else should you know about auto insurance?
Aside from the initial automobile liability (at the amount you choose to purchase), all of coverages must be added or ‘endorsed’ to the policy in order to ‘build’ the policy in such a way that it is appropriate for your specific needs and budget.
If you have a lien on the vehicle, more than likely, your lender will also require that you maintain ‘Comprehensive’ as well as ‘Collission’ coverage on the vehicle. This provides a level of protection for the asset that they have a loan on to make sure that there is coverage to repair the vehicle or pay off the loan balance in the event of a loss. As a general rule, most lien holders will not allow deductibles of more than $500 for either of these coverages while they maintain a loan on the automobile.
If you’re interested in a car insurance policy that will offer you a comfortable level of protection from lawsuits or from car rental, towing or labor bills, you’ll need to choose from the available slate of riders and attachments.
The 6 Basic Components Of An Auto Insurance Policy
Here are the basics you need to know to help you shop for the best auto insurance policy.
- Bodily Injury Liability (required): This is part of the minimum liability set forth by your state and it provides coverage for any injuries you cause to someone else.
- Property Damage Liability (required): This is also part of the minimum liability set forth by your state and it covers any damage you cause to someone else’s property.
- Personal Injury Protection (optional): Better known as ‘P.I.P.’ Insurance. This provides for the treatment of injuries to the driver and passengers of the policyholder’s car as well as other costs associated with an accident, such as weekly lost wages, home services (cooking, cleaning, etc) while recovering, medical co-payments and deductibles, etc. In addition, in Texas, P.I.P. payments cannot be taken back by the insurance company if you file a claim and the other party is found to be at fault and a resulting claim is brought against their company. The insurance term for this is ‘subrogation‘.
- Collision Coverage (optional): Collision is typically an optional coverage on an auto policy that covers the repair of any damage to your car that is the result of a collision if you as the driver are at-fault (otherwise, if you are not at-fault, the other party’s insurance should pay for it). This collision coverage will also have a deductible, which you choose, normally between $0 and $1,000. The deductible is the amount that you must pay as your part before the insurance will cover the remaining balance.
- Comprehensive Coverage (optional): Comprehensive coverage protects you in case of any damage to your car that didn’t involve a collision, such as theft, fire, vandalism, and stiking an animal (such as a deer). Like collison coverage, this will also have a deductible of your choosing, normally between $0 and $1,000. The deductible is the amount that you must pay as your part before the insurance will cover the remaining balance.
- Uninsured / UnderInsured Motorist Coverage (optional): Often referred to as UM/UIM, this offers you protection if you’re injured in a collision with a driver who is either uninsured altogether or whose limits of insurance liability is insufficient to cover the cost of your injuries or property damage.
The 3 Most Common Car Insurance Optional Riders
There are also a number of supplemental auto insurance coverage options in addition to those listed above and they are normally available for a very small increase in premium.
- Rental Reimbursement Coverage: This is a fairly common rider that will cover you if you need to rent a vehicle to replace yours if it’s damaged or stolen. Most common limits are 35/1,050 ($35 per day for 30 days), but some companies allow up to $50/$1,500 ($50 per day for $30 days).
- Towing and Labor Coverage: This covers your out-of-pocket costs in case of a flat tire or if your car breaks down. This often covers the cost of towing itself plus a portion of the actual repair itself. Normal coverage options are $120 or $200.
- Gap (Loan/Lease) Coverage: Gap insurance can pay the difference between the actual cash value of your car and whatever amount is left on your auto loan if your car is totaled in an accident or stolen.