What you should know about the big three in auto insurance coverage
Auto insurance is a necessity, however, choosing the right coverage can be challenging. The confusion starts with choices. There are several types of auto insurance and they all cover different things. The three most common kinds of policies are liability, collision, and comprehensive insurance.
So, what are they and what does each cover? More importantly, do you really need all three?
Liability coverage
Liability auto insurance is meant to protect you financially if you ever cause an accident. It includes bodily injury coverage, which pays for injuries to others, and property damage coverage, which pays for damage to another person’s property (usually the other vehicle).
Bodily injury insurance usually covers:
• Medical bills
• Physical therapy or rehabilitation
• Work time lost due to injury
• Legal representation for the other party
• Funeral costs
• Possibly pain and suffering
Everyone should have liability insurance. If you ever cause an accident that results in serious injuries or property damage, you could end up taking a big financial hit.
According to the DMV, “Liability insurance is the most commonly required type of car insurance throughout the various states. Even in the rare state that does not require liability car insurance, you may find that having liability insurance is worth the financial security.”
Every state that requires liability insurance also has minimum limits the policy must meet. It’s basically the maximum amount the car insurance company has to pay for a claim. When it comes to bodily injury coverage, there is a per-person limit and a total limit if 2 or more people are hurt.
Here’s an example of how this works, according to the DMV. Note that the exact limits are different in each state:
$15,000 for bodily injury per person
$25,000 for total bodily injury
$10,000 for property damage
In many cases, you’ll see the minimum limits written as 15/25/10.
Important note: Liability insurance only covers bodily injury or property damage to others as a result of an accident when you are at fault. It does not cover your injuries or damage to your vehicle.
Collision coverage
As mentioned, liability insurance does not cover damage to your vehicle. Collision coverage, as the name implies, is insurance you buy to pay for damages caused by a collision, either with another vehicle, a building, a guardrail, or some other stationary object. It helps you pay for repairs or replace your vehicle if it is totaled.
Another important note: If your vehicle is totaled, collision insurance will only reimburse you for the current value of the vehicle, not the purchase price.
Comprehensive coverage
Comprehensive auto insurance covers damage to your vehicle that is caused by something other than a collision. It’s really meant for any event that is out of your control. For example, if a storm causes a tree branch to fall on your car, comprehensive coverage would help pay for repairs or replacement.
Comprehensive auto insurance covers:
• Theft
• Vandalism, fire, riots, explosions
• Windshield/glass damage
• Falling tree limbs
• Rocks/objects kicked up by or falling off of another vehicle
• Damage from storms, hail, wind, flood, lightning, or earthquakes
• Accidents involving animals (such as a deer crossing the road)
Sometimes, collision and comprehensive insurance are offered together as one policy.
Do you need collision and comprehensive auto insurance?
Collision and comprehensive auto insurance are not required in all states, so it may be an option for you. Your choice should be based on your financial situation and also the age and value of your vehicle.
“If your car is older, it may not be worth paying for insurance, especially if you can work on saving up enough to replace the car if necessary. If you have a good-sized emergency fund, you may be safe without collision insurance. If you’ve chosen a more expensive car or your car is relatively new, however, collision insurance can help you sleep much better at night,” according to moneying.com.
You can also bring down the cost of a comprehensive insurance policy by installing or purchasing a vehicle that has an anti-theft or tracking device.
Liability, collision and comprehensive insurance are all important types of auto coverage you may need to protect yourself financially in the event that you ever cause an accident or your vehicle is damaged. If you have questions or you need to find an auto policy, contact Avante Insurance today.