What
is covered by a basic auto policy?
Your auto policy may include six coverages.
Each coverage is priced separately.
1. Bodily Injury Liability
This coverage applies to injuries that you,
the designated driver or policyholder, cause to someone else.
You and family members listed on the policy are also covered
when driving someone else’s car with their permission.
It’s very important to have enough liability
insurance, because if you are involved in a serious accident,
you may be sued for a large sum of money. Definitely consider
buying more than the state-required minimum to protect assets
such as your home and savings.
2. Medical Payments or Personal Injury Protection (PIP)
This coverage pays for the treatment of injuries
to the driver and passengers of the policyholder's car. At
its broadest, PIP can cover medical payments, lost wages and
the cost of replacing services normally performed by someone
injured in an auto accident. It may also cover funeral costs.
3. Property Damage Liability
This coverage pays for damage you (or someone
driving the car with your permission) may cause to someone
else's property. Usually, this means damage to someone else’s
car, but it also includes damage to lamp posts, telephone
poles, fences, buildings or other structures your car hit.
4. Collision
This coverage pays for damage to your car resulting
from a collision with another car, object or as a result of
flipping over. It also covers damage caused by potholes. Collision
coverage is generally sold with a deductible of $250 to $1,000—the
higher your deductible, the lower your premium. Even if you
are at fault for the accident, your collision coverage will
reimburse you for the costs of repairing your car, minus the
deductible. If you're not at fault, your insurance company
may try to recover the amount they paid you from the other
driver’s insurance company. If they are successful,
you'll also be reimbursed for the deductible.
5. Comprehensive
This coverage reimburses you for loss due to
theft or damage caused by something other than a collision
with another car or object, such as fire, falling objects,
missiles, explosion, earthquake, windstorm, hail, flood, vandalism,
riot, or contact with animals such as birds or deer.
Comprehensive insurance is usually sold with
a $100 to $300 deductible, though you may want to opt for
a higher deductible as a way of lowering your premium.
Comprehensive insurance will also reimburse
you if your windshield is cracked or shattered. Some companies
offer glass coverage with or without a deductible.
States do not require that you purchase collision
or comprehensive coverage, but if you have a car loan, your
lender may insist you carry it until your loan is paid off.
6. Uninsured and Underinsured Motorist Coverage
This coverage will reimburse you, a member of
your family, or a designated driver if one of you is hit by
an uninsured or hit-and-run driver.
Underinsured motorist coverage comes into play
when an at-fault driver has insufficient insurance to pay
for your total loss. This coverage will also protect you if
you are hit as a pedestrian
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