There are many types of car insurance coverages serving different protection needs of vehicle owners. And motorists can choose the ones they need and leave the rest out to make sure they don’t spend more than they should for insuring their automobiles. The best way of choosing the ones for your current circumstances is to start with knowing what they are and appreciating what they can do for you, should you suffer insurable losses in the future.
So, it is best to start with the coverages most commonly available, assess their benefits, costs and decide which ones you should include in your auto insurance policy;
This coverage isn’t optional as virtually every state requires minimum liability vehicle insurance coverage. It has two key components.
Bodily Injury Liability coverage pays for injuries and consequential losses of third parties who are injured in an accident you caused.
Property Damage Liability coverage pays for damages you caused to other people’s vehicles and properties.
Even though these coverages aren’t optional, you still have a decision to make. The basic coverage limits required by your state is usually fairly low and has a high chance of reaching the limits before paying off all the injuries and damages, leaving you to pay the rest out of pocket. That is why, most experts recommend a 100/300/100 level of liability coverage that has a $100,000 limit for one injured person, $300,000 limit for all injuries and $100,000 limit for property damages.
Uninsured Motorists Coverage (UMC);
This coverage pays for your and your passengers’ injuries and losses if the accident is caused by a driver without insurance. Over twenty states mandate some level of UMC as part of the minimum requirements. Even if it isn’t mandated, this is fairly reasonably priced coverage that is often worth including in your policy. UMC also pays if you are injured in the same situation when you are a pedestrian and in case of hit-and-run accidents. Hit-and-runs may not be considered as an accident with uninsured motorists and excluded in a handful of states.
The ratio of uninsured motorists in the US is 12.6% and, in some states, it can be as much as %25. So, you don’t need to worry about being involved in an accident with an uninsured driver when you have this coverage and therefore UMC is highly recommended, especially in states with a high ratio of uninsured motorists. Also, you should have at least this coverage if you won’t have Collision or Personal Injury Protection on your policy.
Personal Injury Protection (PIP);
PIP is mandated in no-fault states and pays for your and your family’s injuries in an accident regardless of who was at fault. It also pays for lost wages and other consequential losses up to the limits. So, you may have to have it if you live in a no-fault state. Otherwise, it is optional and may provide valuable protection, especially if you don’t have health insurance. In some states, you may have Medical Payments coverage instead and it follows the similar principles as PIP.
Physical Damages Coverages
Next step is to consider the value of your automobile and decide if you need to insure it. This is left to choice, but often you may have to have full coverage vehicle insurance if you have a loan or lease agreement. It has two main components.
Collision coverage pays for repairs or replacement of your own car when it is damaged in a crash, regardless of who was at-fault and usually have deductibles.
Comprehensive coverage pays for other damages to your vehicle like fire, theft, vandalism, acts of nature. It has deductibles too.
These two options are usually sold together under a full coverage automobile insurance. On average, you are likely to pay 3.2 times more than basic liability only coverage if you like to be protected for damages to your own automobile as well. This premium gap can be much wider or narrower depending on the state you live in. That is why, you are advised to get several quotes for both a liability only and full coverage and see if your vehicle is worth insuring for its current value. If it is a brand new or fairly new automobile, you would probably want full coverage.
Rental Reimbursement Coverage (RRC);
RRC pays for rental cars after an insured accident or damage puts your car in the garage for repairs. It usually costs $5 a month on average and would pay around $50 a day for a rental vehicle for up to 30 days in most cases. If you live in a rural area with only one car in the family, this is a very good option. You can leave it out if you have plenty of other transport options if your car needs to be repaired by insurance and stay in the shop for an extended period.
It is another fairly cheap coverage to add to your policy as it only costs about $20 a year. If you ever lock yourself out of your car, run out of gas, need a jump start or towing you can call your insurer for help if you have this coverage.
There are other options as well but they are for more specific needs.
Obviously, the more you add the more you will have to pay for car insurance. The secret is to decide the level of coverage you need and shop around to find the cheapest provider for your circumstances. Quotes often change substantially from one company to the other and therefore this exercise is necessary to make sure you get the best rates.
If you can afford the coverage you picked and you are happy with other details, your auto insurance shopping process is complete until the next renewal. Otherwise, you may have to go back to the drawing board and see what else you can do to bring your premium within budget. Increasing deductibles may be an option. Otherwise, you need to look for additional discounts like paying the premium in full to get further savings.