April 3, 2013
If you drive and/or own a car, you need auto insurance. Understanding what makes up an auto insurance policy is the first step in finding out what works best for you. Your policy is actually a combination of coverage’s that protect you and your vehicle in case of an accident or other incident.
Bodily injury liability, personal injury protection coverage and uninsured motorist coverage protects you and other people involved in an accident. Bodily injury liability covers you if you are in an accident that injures or kills someone else. It provides money to cover a judgment against you if the other parties file a lawsuit.
Personal injury protection coverage covers medical expenses for yourself and any injured passengers in your car. Uninsured motorist coverage pays for your medical expenses in cases where the other driver is not carrying insurance. In some states, uninsured motorist coverage also covers your vehicle damage.
Collision coverage covers damage to your car, whether or not you are considered at fault in an accident. The cost of this coverage is based on the value of your car and on the size of the deductible you choose. A deductible is the amount of money you pay out-of-pocket before the insurance company pays off the balance. The larger the deductible is, the less expensive the coverage becomes. If you have an older car, you must decide if you want to carry this type of coverage, since the maximum payout is based on that car’s cash value.
Property damage liability covers you if your vehicle causes damage to someone else’s property. This type of coverage helps if the property owner files a lawsuit and wins; so carry as much of this coverage as possible. Comprehensive physical damage coverage pays for damages to your vehicle outside of an accident. Examples are flood or fire damage, or if your car is stolen. The price of this coverage is also influenced by the deductible amount you select.
Rental reimbursement is another handy type of coverage. This pays for the cost of a rental car, up to a certain daily amount, while your vehicle is out of service. Rental reimbursement is only valid if your vehicle loss is covered under your policy’s collision or comprehensive coverage.
Most states require drivers to carry liability insurance, both for bodily injury and property damage. Sometimes the required coverage for a state is comparatively low, perhaps only $15,000 to $25,000 for bodily injury liability. That is not enough to cover you in the modern age where personal injury claims can mount into the hundreds of thousands. Consider a policy that covers you for at least $300,000 per accident. As far as property damage liability, even though state requirements are usually require low limits it is best to have at least $50,000 in coverage.
Other factors that determine the cost of your auto insurance policy include your age, driving record, type and age of the vehicle and where you happen to live. Drivers under 25 are considered a higher-risk driving group. Students, both high school and college, can sometimes get a break on premiums if they maintain good grades, usually a B average or better. Taking approved safe driving classes and/or drivers’ education courses can also help lower premiums.
Driving a high-end luxury or sports car will increase your insurance premiums, no matter what your age. A sleek-lined Porsche is much more of a temptation to auto thieves and vandals than your typical family sedan. Most people also drive sports cars a bit differently than a more sedate model. If you plan on splurging on the car of your dreams, consider checking out the price of insurance on the various brands before you make that purchase.
If you live in a state with high traffic and/or high car theft rates, your insurance premiums will most likely reflect the situation. A study of insurance prices for 2011 showed that Idaho had the lowest rates, while Louisiana had the most expensive premiums. Insurance rates can also vary depending on if you are in a major city or in a rural setting. Researching your state’s insurance rates can help you make a more informed auto insurance policy choice.