Auto Insurance Coverage: Choosing The Right Policy For You

Auto insurance coverage is a necessity for all vehicle owners. While the specific requirements vary by state, most states require liability insurance, which covers the cost of injuries and damages caused to others in an accident. The minimum coverage limits are typically set at $25,000 for bodily injury per person, $50,000 for total bodily injury per accident, and $25,000 for property damage per accident. However, it is recommended to have higher coverage limits to adequately protect yourself financially. Collision and comprehensive insurance are also important considerations, especially if you have a loan or lease, as they cover the cost of repairs or replacement of your vehicle in the event of an accident or damage from incidents other than collisions. When deciding on the right auto insurance coverage, it is crucial to consider your state's requirements, the value of your vehicle, and your financial situation to ensure you have sufficient protection.

Liability coverage

Property damage coverage pays for the repair or replacement of the other driver's vehicle, any rental vehicle expenses they may incur, and damage to buildings, fences, or other structures and personal property. It also covers legal fees if you are sued for property damage.

Bodily injury coverage takes care of the medical expenses of the injured party and may include lost wages and legal fees if the injured party files a lawsuit.

The minimum liability limits vary from state to state, and it is important to understand your state's requirements. The coverage limits are typically expressed as three numbers, such as 25/50/10, indicating the maximum coverage for bodily injury per person, per accident, and property damage per accident, respectively.

While liability coverage is essential, it is important to note that it does not cover damages to your property or your injuries. To protect yourself, you may need additional coverages such as Personal Injury Protection and Uninsured/Underinsured Motorist Coverages.

Collision coverage

The benefits of collision coverage include knowing your car is covered in the event of an accident and avoiding paying out of pocket for repairs above the cost of your deductible. It can also provide coverage for your loss when your damaged vehicle is deemed totaled. Additionally, adding a deductible fund alongside your collision insurance coverage can potentially result in paying nothing at all for repairing or replacing your vehicle.

When choosing collision coverage, you will need to decide on the amount of your deductible. This will depend on factors such as the cost of your car and its potential repair costs, as well as your willingness to pay for repairs under the deductible amount. A higher collision deductible will lower your monthly premium, but it's important to consider your ability to cover the costs of repairs when needed.

Comprehensive coverage

If your vehicle has a high cash value or you cannot afford to repair or replace it out of pocket, comprehensive coverage is a smart choice. However, if your vehicle has a low cash value and you have a higher deductible, it may not be worth the additional cost.

Uninsured motorist coverage

• Uninsured motorist bodily injury (UMBI) covers medical bills for you and your passengers if you're hit by an uninsured driver.
• Uninsured motorist property damage (UMPD) covers damage to your vehicle caused by an uninsured driver.
• Underinsured motorist bodily injury (UIMBI) covers medical bills for you and your passengers if you're hit by a driver with insufficient insurance.
• Underinsured motorist property damage (UIMPD) covers damage to your vehicle caused by a driver with insufficient insurance.

The cost is the only significant downside of purchasing uninsured motorist coverage. However, it is relatively inexpensive compared to the potential benefits. When deciding on the amount of coverage, consider matching the limits of your UMBI and UIMBI coverage with your liability coverage. For UMPD coverage, you can select a limit that reflects the value of your vehicle.

If you live in a state with a high percentage of uninsured drivers, adding this coverage to your policy is a wise decision. Even if it's not required in your state, driving without uninsured motorist coverage puts you at serious financial risk.

Personal injury protection

PIP covers reasonable medical costs, including surgeries, medications, diagnostics (X-rays, CT scans, etc.), prosthetics, nursing care, physical therapy, and medical devices. It also covers lost wages due to injury and recovery, as well as replacement of necessary services normally provided by the injured party, such as childcare or household maintenance.

The amount of PIP insurance you need depends on your state's requirements and your personal financial situation. In Texas, for example, insurance companies are required to offer every driver at least $2,500 of PIP insurance, and you can typically increase your coverage up to $5,000 or $10,000. It is recommended to have enough PIP coverage to protect yourself and your loved ones from serious medical bills in the event of an accident.

PIP is distinct from liability insurance, which kicks in when the insured party is at fault for an accident that harms someone else. Liability insurance pays for someone else's costs when the insured party causes a crash. PIP, on the other hand, covers your own expenses and those of your passengers, regardless of fault. It is also important to note that health insurance can sometimes cover additional medical expenses that exceed your PIP policy limits.

When and How to File a PIP Claim

In Texas, for example, personal injury protection only covers costs that occur within three years of an accident. It is recommended to report all expenses and injuries to your insurance provider as soon as you become aware of them. When filing a claim, be sure to include all relevant documentation, such as receipts, bills, and proof of income loss, to ensure your claim is processed quickly and accurately.

Frequently asked questions