Car insurance – it can be a bit of a pain to deal with, but most people are required to have it. Depending on how valuable your car is (and whether you have some or all of it financed by a bank) your coverage may vary, but most states require a minimum level of coverage in order to register and put tags on a vehicle.
This may be a bit of a refresher course for some but when push comes to shove, do you really understand all of the different components of your auto insurance policy? Today, we’re clearing things up by going over the basics.
When it comes to auto insurance, even if you’ve been driving for years there may still be some areas where you’re unclear on the different components of your policy. The major players in any good auto policy include:
- Comprehensive Coverage – When it comes to coverage, comprehensive is the big security blanket. It kicks in for any covered loss outside of a collision – theft, fire, vandalism, etc.
- Collision Coverage – Just like it sounds, this type of coverage is used when your vehicle strikes an object, such as another vehicle, a telephone pole, a building, etc.
- Liability Coverage – Auto liability covers damage to another person or their property caused by your vehicle. This type of coverage is mandated in most states, though required limits vary.
- Bodily Injury Coverage – If you are at fault in a crash, your bodily injury coverage pays for the damage and medical expenses for the other party (or parties) for which you are liable.
Premiums VS Deductibles
When it comes to other insurance jargon that throws people off, deductibles and premiums are among the top for confusing insurance customers. In short, an insurance premium is the amount that you pay monthly to the insurance company to receive coverage. This is simply your monthly bill to maintain coverage.
Conversely, a deductible is the amount of money that you’ll be expected to pay prior to your insurance company covering the remainder of a loss. For example, if you are liable for $10,000 worth of damage and have a $500 deductible, you would pay $500 and your insurance company would pay out the remaining $9500 in accordance with your policy.
Uninsured & Underinsured Motorists
When it comes to auto insurance, sometimes things slip through the cracks. For example, someone’s insurance may lapse after they’ve registered their car; or they simply drive an unregistered vehicle. If you’re involved in an accident where the other driver is underinsured (their insurance isn’t adequate to cover your loss) or uninsured (they have no insurance at all OR they perpetrate a hit-and-run and cannot be located) then it may benefit you to have coverage for those types of situations.
In the case of an accident with an underinsured or uninsured individual, if you have the appropriate coverage, your insurance will kick in to cover the remainder of the loss and get you back on the road.