A single auto insurance policy often includes several types of insurance coverage, so it is worth taking professional advice from an independent agent. They can help find the amount of type of insurance that meets your needs and also complies with the law in your state. Some of the main types of insurance coverage that may be included in your policy are:
Liability for Bodily Injury:
A minimum amount of coverage is usually set by the state. In some areas it can be low at around $10,000/person and will be set at $20,000/accident. Often policies stop at a maximum amount of around $300,000 or $5000,000 per accident.
If you are involved in an accident and you injure someone you should make sure you carry enough liability coverage to protect your assets because it is possible that you could be sued. The recommended limit is between $100,000 and $3000,00 but in some cases even this is not enough.
Liability coverage is not an area in which you should even consider cutting costs. If you own a million-dollar property and have insufficient liability coverage, you could lose your home.
The more assets you have, the greater their value, then the more you stand to lose. You need to make sure your liability policy covers all your assets. It is worth looking at extra coverage via a Personal Umbrella/ Personal Excess Liability policy.
Liability for Property Damage:
Again, a minimum is usually set by the state, but it may not be enough if you are involved in a serious accident. Many cars on the road can cost in excess of $50,000, so you could find yourself with a large repair bill if you have insufficient insurance. Again, a Personal Umbrella policy, will cover you for excess costs, however, your insurance provider may expect you to take out higher than minimum insurance before you will quality for this.
If you are involved in an accident this insurance will cover the cost to replace or repair your car. The cost will depend on the vehicle you want to insure. An important decision, apart from whether you want this cover at all, is what amount of deductible you are willing to take. If you have a low deductible the premium will be higher and vice versa.
Deductibles range from $250 to around $1000. If you have a new, expensive vehicle then collision coverage is advisable, but for older cars it becomes less of an issue. For example, if the value of your car is $1000 and you have a deductible of $500 it is not cost effective to take out collision coverage and most states do not require it by law.
This will cover anything not caused in a collision, so things like theft or fire. Again, this is an insurance that involves choosing your level of deductible, with the higher deductibles reducing the monthly premium. This is often sold alongside collision coverage and when bundled together the two forms of insurance may be known as Psychical Damage coverage. Although State law may not require this, you may find that if you lease your car or have bought it using a loan you will be required by the companies to take out Physical Damage coverage on the vehicle.
Whatever you choose here will be the maximum that will be paid out to cover medical expenses for yourself and any passengers if you are involved in an accident. For example, if you choose $2000 as the medical expense limit then you and each passenger can claim up to that amount for medical bills if they are involved in an accident while in your car.
Uninsured/Under-insured Motorist Coverage:
In the event of an accident it can be the case that the other driver is at fault but that they do not have enough (or any) insurance. In this case this will cover the costs up to the limits set in your own coverage. In some states they limit the coverage to personal injury but in others it will also cover property damage. The State will set limits and whether or not the coverage is needed.
Personal Injury Protection (“PIP” or “No-fault”):
Some states require this insurance which will cover your own and your passengers’ medical costs. This will be payable whoever is at fault, and the state will also set compulsory and optional limits.