Auto Insurance

Auto Insurance – There Are Required Minimums But You Have Options

buy real viagra online australia When it comes whether or not you should buy auto insurance, you really don’t have a choice. If you want to drive a car, you must have insurance. Almost every state in the United States has some form of auto insurance requirement. And with good reason. Compared to real property, the risk of injury to others and damage to their property from your operation of an automobile is much greater.

As such, the cost of insuring a vehicle is relatively greater than insuring a home when compared to each asset’s respective market value. Just like homeowners insurance, auto insurance essentially consists of two major parts. The first is liability protection. The second is the property protection aspect of the policy, which is usually collision and comprehensive coverage.

Although you are generally mandated to buy auto insurance if you drive a car, there are still benefits to knowing the basics. A little knowledge can help you to get the right coverage while shopping around.

Types of Coverage in an Auto Insurance Policy

The available protection in an auto policy can be broken down into four parts. The first three generally deal with liability protection. The last involves physical protection of the auto.

Coverage A – Liability for damage to others and their vehicles

Gives you protection from legal liability arising out of pain and suffering and medical bills caused by bodily injury to others. It also covers you for physical damage to another car or property. This type of coverage is generally mandatory. Each state has different minimum requirements. Liability coverage is typically stated as  25/50/10, for example.

This means that you have $25,000 coverage for bodily injury per person per accident. The second number represents the overall limit for bodily injury per accident. In this case it is $50,000. The final number is the coverage limit for property damage per accident. In this example it is $10,000. The insurer will only cover you up to the policy limits. Intentionally caused damages are not covered.

Coverage B – Medical payments for yourself and your own passengers

This part pays for medical bills of you, the insured, and other passengers in your car. The coverage can vary, but the minimum is usually $1,000 per person, per accident. Another variation of coverage B is personal injury protection (PIP) coverage. It is similar to basic medical payments coverage, but also pays for loss of income.

This coverage is optional in most states. The ones that require it generally mandate PIP coverage. Coverage B provides protection regardless of whether or not the accident was your fault. This coverage is typically lower since medical bills are generally covered by health insurance.

Coverage C – Uninsured or underinsured motorists

Provides protection if you are hit by another driver who either has insufficient auto insurance or none at all. Coverage can be for bodily injury or property damage. Some states do not require this type of insurance, but others require uninsured motorist (UM) coverage for both bodily (BI) injury and property damage (PD).

Coverage for BI of 25/50 would indicate $25,000 coverage per person, per accident. The second number is the limit for the total BI coverage per accident. The PD limit of UM insurance is stated as a single number per accident.

Coverage D – Physical damage to your own vehicle

Covers you for actual physical damage to your vehicle. This type of coverage is optional if you own your vehicle outright. However, if you finance or lease a vehicle, you will generally be required to purchase collision and “comprehensive” or other-than-collision (OTC) coverage by the financing company. They do, after all, have an interest in protecting their property/collateral.

Collision covers you if your vehicle collides with another vehicle or object. Comprehensive or OTC coverage protects you from non-collision perils such as theft, flood, fire, vandalism, and falling objects. If you have an old and inexpensive vehicle, it usually does not pay to carry coverage D protection.

Deductibles on Auto Insurance

For auto insurance, deductibles only apply to the collision or OTC coverage. You can use a higher deductible to lower your premiums. However, make sure it is something you will be able to comfortably afford. Deductibles typically range from a couple of hundred dollars to about $2,000.

Who is Covered Under Your Auto Insurance Policy?

For liability coverage, your policy will generally cover you and any family members or others who can legally drive and who live with you. The insurer may require you to list such individuals on your policy.

Anyone with a valid driver’s license who does not live with you to whom you give permission to drive your car may also be covered under the “permissive use” clause as an “occasional driver”. You do not need to list anyone living with you who is over 18 years of age and who owns their own vehicle. Your policy can list them as “excluded.” The policy generally will not cover excluded individuals.

Liability insurance generally follows the driver. And collision and OTC insurance follow the car. So if someone else drives your car, that person’s own liability insurance will cover them to the extent they have coverage.

Any damage the driver causes to others will first be paid by their own policy. You as the vehicle owner may be responsible if claims exceed their policy limits. For physical damages done to your car if someone else drove it and crashed it, your own collision or OTC coverage, if any, will cover the damage.

How Much Auto Insurance Is Enough?

The state liability minimum requirements are generally just that, minimums. You may have significant assets such as a home which you want to protect in case of a legal liability arising from an accident. In such a case, you will probably want to purchase more than the minimum. The state minimums are generally in the tens of thousands of dollars.

However, depending on the amount of assets you own, many experts recommend liability insurance between $100,000 and $250,000 per individual, per accident. Recommendations for the overall liability limit per accident generally range from about $300,000 to $500,000. For property damage liabilities, a commonly recommended limit range is $50,000 to $100,000.

If you have substantial assets, you can even purchase an umbrella policy for additional coverage. Such coverage is relatively less expensive, as it kicks in only after you meet your regular auto insurance policy limits.

For medical payments or PIP (coverage B), you can probably just stick with the state minimum if there is one. Otherwise, you probably don’t need more than a couple of thousand dollars of coverage.

Uninsured motorist coverage should typically be similar to your liability coverage. And as far as collision and comprehensive coverage go, the value of your car will determine the amount of coverage.

Factors That Affect Your Auto Insurance Premiums

Besides the amount of coverage you purchase and the size of the deductible you choose (coverage D), several other factors help to determine your premiums. Your driving record is very important. A clean record can help you obtain lower premiums.

The more accidents you’ve had and the more points on your driver’s license, the more you can expect to pay. So it pays in more ways than one to drive safely. Age and gender are also factors. If you are under 25 years of age, you will pay more. Being male also may result in a higher premium, especially if you are single. Credit score can also affect premiums. A high score can lower your cost.

The type of car you drive and the area in which you live are also relevant, especially for collision and OTC coverage. A car deemed safer and less likely to be stolen, for example, will typically cost less to insure. An expensive car will cost more to insure. Same with a sporty type of car which someone may drive in a way which can increase risk of accidents and/or traffic violations.

If you live in an area more prone to theft or vandalism, you may also have to pay higher premiums. Attending safe driving courses can also help you to lower your premiums. For students, good grades may also help in getting a bit of s discount with some insurers.

Conclusion

Armed with some basic knowledge, you can now comparison shop in a more informed manner. It is important to compare policies on an “apples to apples” basis.

As with any other type of insurer, it is key to check their financial status. You want to make sure the insurer will be around to pay a claim if the time comes. There are several large insurance companies which sell auto coverage. Among them are recognizable names such as Liberty MutualState Farm, Allstate, and GEICO.

Insurance requirements change over time. This can include teenagers first getting their own driver’s license. Or it can be a child finishing college, moving out of the house, and getting their own coverage. So be sure to also check your coverage regularly to make sure you have the right amount and type.

Granted, almost every state mandates at least some level of insurance. But you do have some flexibility in the type and amount of coverage you choose to purchase. You also have some opportunities to reduce premiums by driving safely, taking safe driving courses, and getting good grades.

 

 

 

 

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