| Car Insurance Policies 101 |
| Written by Fred McConnell | |
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There's a big variety of car insurance products on the market, offering protection from many of the liabilities that can occur because of a traffic accident or vehicle mishap. Some of these include coverage for damage to your car, other property that may be damaged in a wreck and any injuries victims of a wreck may suffer.
While it may be tempting to just purchase the minimum coverage required by your state, you may want to consider all of the liability you may incur as a result of an automobile accident. Health car costs continue to skyrocket, and injuries sustained in a car accident may be substantial. If you don't have enough coverage for medical expenses included in your car insurance policy, you may be on the hook for any costs not covered by your policy. Also, if you only have a minimal policy, you're probably not covered for occurrences such as theft or weather damage to your vehicle. When purchasing a policy, it's important to know the different types of coverage available. By knowing and understanding the types of coverage available, you can make an intelligent, informed decision about how much and what type of insurance you need. Liability insurance is the barebones minimum insurance required by most states. This type of insurance offers coverage for claims of bodily injury or property damage when the insured driver is held responsible for an accident. Basically, with liability insurance, the car you wreck into will be covered, but any damages to your car won't. How much coverage you're required to carry will likely vary among the states, but you can always purchase more than the legally required minimum. Liability insurance is generally available as a single limit or split limit policy. A single limit policy sets one maximum limit for bodily injury and property claims. For example under a single limit liability policy with a limit of $20,000, your policy will pay for any covered bodily injury or property claims up to $20,000. Split limit policies set separate limits for bodily injury and property claims. For example, under a split limit policy with a limit of $15,000 for property damage and $5,000 for bodily injury, the policy will pay only up to $15,000 to repair the property, and only $5,000 for any medical claims. Often, your liability policy also sets limits on how much the policy will pay per person for medical claims and a total per accident limit. When most people refer to full coverage, they're talking about comprehensive and collision coverage. If you're purchasing a car on an installment plan, chances are that your lender will make you insure your car for both comprehensive and collision. Collision coverage basically pays for any damage to your vehicle as a result of an accident that's your fault. This coverage is intended to pay for the cost of either fixing your vehicle, or if it's totalled, paying you a lump sum which is the equivalent of the book value of your car. When you make a claim, you'll have to pay the deductible, which varies from policy to policy, but the rest of the cost of your repair, up to your policy's limit, is on the insurance company's dime. Comprehensive coverage works like collision, except that it pays for damage to your vehicle caused by occurrences other than collisions. This could include damage caused by weather, natural disasters, impacts with wildlife, theft or mischief. In addition to comprehensive, collision and liability insurance, there are several other coverage options you can choose for your automobile insurance policy. Underinsured coverage pays for damage caused by another driver who may not carry insurance. For example, if another driver rear-ends you, but does not have insurance or sufficient insurance to pay for all the damage he or she caused to you, your passengers and your vehicle, your insurance will pay for the damage and you and your passengers' medical bills if you have underinsured coverage. If you purchase loss of use coverage, you will be provided with reimbursement for a rental car if your car is damaged and undriveable for a time after an accident that's covered under your policy. Loan/lease payoff, or gap coverage, pays the difference between the book value of your car and how much you owe on it if you've financed its purchase. This insurance innovation was introduced in the 80s to help vehicle owners from ending upside down in a car loan as a result of a wreck. Other coverages include policy provisions for the cost of towing your vehicle or to cover the price of replacing any personal property that may be damaged in a wreck. The more coverage you buy, the higher your insurance premium is likely to be, but having that coverage may come in handy if you're in an accident one day. Choose your coverage carefully with an eye to your budget and however accident prone you may be. |
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