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What to know to build the best policy for you
Shopping for auto insurance can be a daunting task, but before you even delve into the myriad of agents, companies and pricing, you should understand what the terms mean and what is required in your particular state. While a few states do have their own particular statutes, most follow a relatively general outline for coverage and definitions of that coverage. You should check with your state insurance commissioner or perhaps your department of motor vehicles to make sure you get the coverage required by your state laws.
Most automotive insurance policies are comprised of six basic elements of coverage. They are:
Collision: This is coverage for your vehicle if it is damaged in a collision with another vehicle or object. If you have taken out a loan to purchase your vehicle, collision coverage is usually mandated by the financial institution to protect their collateral (the vehicle).
The collision premium usually has a deductible, which could vary from $200 to as much a $1000. The deductible is the amount you must pay as your part of the cost of repairing the vehicle. If your vehicle is totally destroyed, or totaled, the insurance company may offer you a settlement minus your deductible.
Comprehensive: If you encounter a loss due to theft or damage caused by something other than a collision with another vehicle or object, comprehensive coverage comes into play. Most common incidents are a cracked or broken windshield due to stones or other flying objects. However, other incidents covered are fire, falling objects, hail storms or even contact with animals such as deer. This usually carries a deductible of a variable amount, which you can adjust to lower your premium just like collision coverage.
Property Damage Liability: You need this coverage to protect you if you, or someone you permitted to drive your car, cause damage to someone else's property. Most common coverage includes destruction of utility poles, fences or buildings that your car harms.
Bodily Injury Liability: This is coverage you must look at very carefully. This covers injuries you cause to someone other than yourself. The term liability should signal your attention, because you can be liable for a substantial sum of money. If you have assets, such as a home or other possessions, your protection amount should be substantial enough to protect such property.
Medical or Personal Injury: Just as it sounds, this covers you, or your passengers for medical treatment due to injuries sustained in an accident. As medical costs escalate, this is an area to watch so you are not under-insured. However, if you have other medical insurance, you might be able to lower the coverage you carry on your auto insurance.
It may seem very complicated, but if you keep a few simple rules in mind, you will always know the basics to remember when considering auto insurance.
- Property coverage pays for damage or loss of your car, or other objects
- Liability coverage pays for your legal responsibility to others
- Medical coverage pays for the cost of treating injuries to persons
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