Motorists first should figure out how much car insurance coverage they need before worrying about buying a policy. They should look at what is included in various types of policies to decide which would suit them best rather than start searching for the cheapest. The premium difference between a basic policy and a good one may be negligible, especially if you believe additional protection is worth the money.
About 72% of auto insurance policies sold in the US are full coverage that makes it the most popular. This suggests that most people buy it for peace of mind and not because they are legally required. So, it is best to break it down based on types of policies and explain what covers they include.
What Does Liability Car Insurance Cover?
As we discussed in detail in another post on this site, liability is for the damages you may cause to other people and their properties. It doesn’t pay any of your or family’s repairs and injuries.
Yet, you need to buy enough to make sure that all the liabilities arising from an accident you caused are paid for. Otherwise, you will be putting everything you own on the line to pay for such damages and injuries. That is why it is fair to say that the richer you are the more you should buy.
Does Insurance Cover Auto Repairs?
No matter what type of a policy you have, it should pay for repairs to third party vehicles up to the limits should you be the one who caused the accident. Remember that third party vehicles are the ones belonging to others. Does it compensate for your own losses? This totally depends on the type you have. Liability only doesn’t provide any protection for the vehicle owner other than against third party claims. You need to have Collision and Comprehensive to claim for repairs to your own automobile and they are explained below.
What Does Full Coverage Vehicle Insurance Include?
As liability only doesn’t pay for your own losses you need to consider how to handle such risks that come with driving. Accidents do happen and statistically, you are likely to have 3 – 4 accidents in a lifetime. So, you cannot really ignore it and hope for the best.
A typical full coverage auto insurance policy would be a good solution for most people as it includes Liability, Collision and Comprehensive at a fairly reasonable premium. These three take care of the largest damages and losses you may suffer or cause others to suffer and therefore can prevent a potential financial ruin.
You may see several others included in a decent package depending on the provider and the requirements. No fault states require minimum Personal Injury Protection (PIP) as part of their minimum limits. Some states require Uninsured Motorist Coverage to be included with every policy sold automatically. And some like to include Rental Reimbursement as well to make it more attractive.
So, Full coverage car insurance at least provides Liability, Collision and Comprehensive and may have more. It is best that we look at the essential components of a typical policy and explain each of them.
Liability Coverage: A typical policy must include this. Most auto insurers tend to offer higher than the minimum enforced in each state in their plans. Still you should check to make sure that you are happy with the limits included in. You can always ask to increase the limits or look for packages with larger amounts.
Collision and Comprehensive Coverage: The next thing that comes to mind is damages to or total loss of the vehicle. It can be stolen, get involved in an accident with an uninsured motorist, perish in a fire or totaled due to natural disasters. Adding collision and comprehensive to a policy makes sure that the vehicle is protected if anything happens to it.
– Collision Cover: As the name suggests, it pays for damages due to traffic accidents. The vehicle would either be repaired or totaled following an accident. If it is repairable, the insurer would pay for the costs of repairs. Otherwise, it would send you a check for its open market value.
– Comprehensive Cover: It pays for other damages to a car like flood, hurricane, falling objects, theft, fire, vandalism, civil disturbance and so on. So, this is for all the other happenings to your automobile including accidental damages, except collision.
You are not legally required to have a provision for your own losses but it would be a sensible thing to do, if you can afford it and the automobile is worth a little money. Most people cannot afford to replace their cars on their own if something happens to it and therefore they should have insurance protection. On the other hand, you may be alright not to bother if you own a clunker that is worth less than $4,000.
Uninsured Motorist Coverage: About 14% of US drivers are driving without insurance. This is a serious number and it can be even worse in your state as some go up to as much as 24%. If they cause an accident it is fair to assume that they wouldn’t have the means to pay for the losses they caused.
This may be automatically included because a few states require it to be included in every policy sold. If not, it is always a good idea to add, just in case an uninsured driver causes damages to your vehicle and injuries to you. It is there to help even when you are a pedestrian.
Personal Injury Protection (PIP): The next you should consider is PIP or Medical Expenses Coverage, especially if you don’t have a good health plan. This is the part that pays for injuries you and family may suffer regardless of who is at fault. If your health plan includes such injuries and costs you may not need it. Personal injury protection pays for consequential losses like loss of wages as well while medical expenses is just for medical costs. PIP is required as part of minimum in no fault states but its limits would be low.
Once you have all the above you can consider yourself fully insured.
Other Additions: However, you can add more if you want. For example, you can add GAP, rental reimbursement, accident forgiveness, towing and emergency assistance. Some full policies may have extras included to make them more attractive but it can make car insurance more expensive at the same time. You need to look at the cost while considering these additions and decide if they are worth the money since they are not likely to cause you financial ruin.
Premium prices can be as individual as DNA and therefore difficult to guess on a personal level. Just remember to get a few vehicle insurance quotes for both types in order to increase chances of finding the best value for your money. An automobile insurer who has offered the best rate for the basic may not offer the best rate when you want more. That is why you should always get alternative quotes.