Whether you are shopping for a new vehicle, or you’ve just driven off the lot with your new ride, there are ongoing costs of car ownership that require some attention. Keeping up with the monthly loan or lease payment is a must, but understanding what your auto insurance expense will be moving forward is just as important.
Here we break down what auto insurance is, and the various types offered to vehicle owners.
Auto Insurance
Auto insurance is generally defined as protection against financial loss in case of an accident involving motor vehicles. However, there are several different subcategories of auto insurance drivers should understand. Under the broadest terms, car insurance encompasses property, liability, and medical coverage. However, these types of insurance are further defined into subcategories of coverage, detailed below.
1. Bodily Injury
This coverage is to provide financial assistance based on injuries that you, the driver, cause to someone else. This insurance is required by all states, although the minimum requirement may not be enough to cover all expenses incurred due to a significant accident. It’s essential to look closely at this coverage to ensure it is enough to protect you as the driver.
2. Personal Property Liability
This coverage pays for damages you, the driver, cause to someone else’s personal property. Typically, this is damage to the other driver’s car. However, it may include other property, such as fences, light poles, or other structures damaged in an accident.
3. Personal Injury Protection (PIP)
This coverage pays for the medical attention given to the driver and passengers of the driver’s car after an accident. This can include medical payments or bills, lost wages, as well as potential funeral and other final expenses.
4. Collision
This coverage pays for damages to the driver’s car resulting from an accident. This coverage is a protection that can be removed for older vehicles if one deems that the costs of maintaining insurance are no longer worth it, as the car may no longer be worth repairing.
5. Comprehensive
This coverage pays for damages caused by things outside of a normal collision with another driver. These may include theft, fire, natural disasters, or incidents with animals on the road or elsewhere. This is another area of coverage that may be removed with older cars to reduce insurance payments.
6. Uninsured Motorist
This coverage pays for damages caused by a motorist without insurance, or in a hit-and-run situation. Most states require uninsured motorist coverage to be in place.
How much coverage should I carry?
This is a common question among people first looking into automobile insurance or revisiting their current policy details. The answer to this question varies from person to person. However, all states require a minimum amount of liability insurance for all drivers or some other form of financial responsibility.
The insurance minimum is not generally the amount recommended, as most accidents cause more substantial damage. Being on the hook for the balance after a significant accident can leave many in a serious financial bind.
If you’re unsure how much coverage is appropriate for your situation, consult with an insurance agent and discuss your options compared to the cost. Additionally, you could consider the auto insurance rule of thumb that many drivers (and agents) swear by.
The rule of thumb is normally 100/300/50, or $100,000 of coverage per person, $300,000 per accident, and $50,000 property damage coverage.
Next, choosing and automobile insurance provider.
