Auto Insurance: The Basics

A basic automobile policy safeguards against property damage, liability and medical costs - its actually a package of different coverages.

In short, an auto insurance policy is a form of protection against risks associated with owning and driving a car, which could lead to financial loss if not properly covered by insurance.

What's in an Auto Policy?
 
Your Auto Policy may be composed of the following coverages:
 

      Property Damage Coverage.
      Pays for the damage you've caused to someone else's
      automobile property. Does the same if someone was
      driving your car without permission.


       Bodily Injury Liability.
      Covers you or a family member in case of injury caused
      to a third party. Adequate liability insurance is essential
      given the high cost of going to court and, if you're found
      liable, paying the ensuing damages. Most states require
      liability insurance and the minimum - as much as
      $100,000 per person and $3000,000 per accident.
      Check into umbrella policies which expand coverage
      and increase compensation limits.


      Medical Payments or Personal Injury Protection (PIP).
      Pays the hospital and doctor bills and lost wages
      incurred by the driver, or passengers, resulting from the
      accident.
 

      Uninsured & Underinsured Motorist Coverage.
      Compensates you or a family member if involved in an
      accident with an uninsured motorist or a hit and run
      driver. Underinsured reimburses you if the driver at
      fault has an amount of insurance insufficient to
      compensate you for a total loss.

 
      Collision Coverage.
      While not mandatory, this reimburses damage to your
      car that results from an accident. Collision generally
      comes with a deductible, as much as $1,000, which you
      are required to pay out of pocket in the event of an
      accident. If the accident was not your fault (and of
      course it never is), your insurance company might
      reimburse you for the deductible amount.   


      Comprehensive Coverage.
       Reimburses for loss due to theft or damage caused by
      something other than an accident such as fire,
      earthquakes, falling objects or getting hit by very large
      animals such as a deer. This coverage, seldom
      mandatory, usually comes with a small deductible.

 
 
Before purchasing a car, whether it be new or used, you should understand that sticker price, cost of repair and incidence of theft all factor into your premium amount. Many insures offer discounts if your car has features that reduce risk of injury (such as air bags and anti-lock brakes) or theft (anti-theft locks and alarms). Low mileage, safe driver records and long time customer discounts can save you money, as can insuring with the same company that underwrites your home.