Auto Insurance Primer
The very act of driving an automobile, even for a quick trip to the corner store, is an exercise in financial responsibility. While the vehicle is moving, you (the driver) must be able to pay for any potential injuries or damage should an accident occur. While a wealthy person might be able to cover the costs of an auto mishap "out-of-pocket", the vast majority of people rely on a personal auto insurance plan to cover their exposure to the risk of an accident.
All states require that drivers maintain adequate financial responsibility for their vehicles and set minimum amounts of acceptable coverage. Auto insurance coverage is broken down into three components. The format looks like this:
25 / 50 / 10
- $25,000 is the amount to be paid for one injury or death in an accident.
- $50,000 is the total amount to be paid for all injuries or deaths in an accident.
- $10,000 is the amount to be paid for property damage in a single accident.
These amounts will vary from state to state. They represent the absolute minimum amount of coverage a driver may carry. Auto liability coverage is intended to protect you financially if you are at fault in an accident. Compensation for injuries and damage caused by an accident can be very costly. It would be wise to secure coverage at a level much higher than the state minimum.
Extended Auto Coverage
The liability coverage shown above demonstrates that the driver meets the test of financial responsibility. These figures represent the minimum amount of coverage most states require. But what about coverage for you and your vehicle?
If the other driver is at fault, his liability coverage will pay for your medical expenses and property damage, just as yours would cover his in the reverse situation. However, if the other driver has minimal or no liability coverage there could be little or nothing available to pay for your expenses.
Uninsured/Underinsured Motorist Protection:
Uninsured/Underinsured Motorist Protection (UM/UIM) is offered by most insurance companies to cover yourself and the passengers in your car if you are involved in an accident with a driver with little or no liability coverage.
Collision Coverage:
Collision coverage pays for damage to your vehicle caused by collision with another object. In addition to hitting another vehicle, running over a stationary object in the road or a rollover accident would also count as collisions.
Comprehensive Coverage:
Comprehensive coverage pays for the damage to your vehicle that are not caused by collision or upset, including theft or larceny, glass breakage, falling or flying objects and hail, water or flood. Both collision and comprehensive auto coverage are subject to deductibles.
How to Save Money on Auto Insurance:
There are some simple things you can do to save money on car insurance such as opting for higher deductibles and combining home and auto policies for a discount on the premium.
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