Auto Insurance Decoded

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This is a guest post.

The world of insurance is a complicated realm and one where it’s not always clear which of the available options would be in your best interest. In this respect, auto insurance is no different than any other type. There are various types of coverage available and, to make matters worse, each state has its own requirements that residents must adhere to. Therefore, it’s important to arm yourself with an understanding of the coverage options available and your local requirements.

Basic Liability Coverage

Liability coverage is limited to paying for damage you do to other people and their property in an accident. Liability coverage typically involves three separate components:

  1. Bodily injury coverage per person (the maximum amount paid to each individual for injuries sustained)
  2. Bodily injury coverage per accident (the maximum amount paid for injuries sustained in a single accident, regardless of the number of people involved)
  3. Property damage (the maximum amount paid to replace or repair property that is damaged in an accident)

Bodily injury liability coverage protects you if you’re responsible for an accident that hurts another person. It covers their injuries and lost wages. But remember, bodily injury coverage doesn’t apply to your injuries. Property damage coverage covers damage you cause to somebody else’s property. Again, this doesn’t apply to damage caused to your own property, only others.

Just about every locale requires some type of liability coverage. Check your local Department of Motor Vehicles for specifics on what liability insurance you are required to have, including minimum coverage amounts.

Comprehensive and Collision Coverage

While liability insurance is designed to cover losses experience by others when you are involved in an accident, comprehensive and collision coverage is designed to protect your losses.

  1. Comprehensive coverage pays for damages to your vehicle resulting from something other than a collision. Things like fire, theft, vandalism or damage caused by hitting animals may all be covered.
  2. Collision coverage pays for damage to your vehicle that is caused by your vehicle rolling over or through a collision with another vehicle or objects like buildings, fences or telephone poles.

This is not usually a requirement but if you are ever in an accident and don’t have comprehensive and collision coverage you may be responsible for paying the costs of repairing or replacing your vehicle out of your own pocket.

Uninsured/Underinsured Motorist Coverage

Uninsured and underinsured motorist coverage is where things can get a little more tricky. Sometimes these two are lumped together into a single policy and at other times they are considered two separate situations. Additionally some areas will require some type of coverage that falls into this category while it may not even be available in others.

Uninsured and underinsured motorist policies are designed to protect you in the event that you are involved in an accident with someone who does not have any insurance at all or someone who does not have enough coverage to meet the requirements. These will typically contain the same components as liability: bodily injury and property damage. Again, you should check with your local DMV to find out if this coverage is required in your area or not.

Now that you have a good understanding of what coverage is available and what is required in your area you can now start comparing insurance quotes by contacting various insurance companies.

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