Every auto insurance policy is made up of a few basic coverages and limits. However, it is vital to understand that car insurance companies customize their policies to include the basics and any extras that you may need or want. Some of these coverages include liability with bodily injury and property damage limits, no-fault with medical expense and income loss, comprehensive, collision, emergency roadside assistance, rental car insurance, and uninsured or underinsured motor vehicle with bodily injury limits. Most companies also offer discounts or premium reductions for things like insuring multiple vehicles, maintaining multiple lines (home, health, life), being accident free, having a good driving record, and more.

Coverages and Limits

Listed below are some brief definitions of the most common terms you may encounter on your policy agreement. This is not a comprehensive list, but will get you started on understanding the factors that influence the price of your policy. With this information you will want to check with potential insurers and obtain a quote on the price of each coverage types, as well as any discounts available to you. Armed with this information you will be able to compare and contrast different auto insurance companies and buy the cheapest policy with the best coverage.

• Liability Coverage: Liability insurance coverage protects you from having to pay an exorbitant amount of damages when you are found to be the person at fault in an accident involving bodily injury, death, or property damage loss to the other party or parties involved in the incident. This type of coverage can be claimed for loss of income, medical expenses, and for pain and suffering by another person. Liability coverage does not compensate you, the driver, for any loss or damages to your passengers or your vehicle.

 

• No-Fault Coverage: Because of the increasing costs to insurance companies by motorists suing for damages, no-fault insurance protection has become a necessity for many in reducing costs. No-fault coverage allows an insurer to reimburse the policy holder directly for any injuries that may have been sustained in an automobile accident. In 2011 there were only 12 states that required no-fault coverage and three states that offered it as an option. Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah are the states considered No-Fault States. Those states that offer no-fault insurance as an option are Arkansas, Delaware, and Maryland as well as the District of Columbia. If you live in one of the aforementioned states, it is important for you to discuss the no-fault options available to you and to make an informed decision. The cheapest quote is not necessarily the best choice.

 

• Comprehensive: Comprehensive coverage protects against financial loss to the insured from damages incurred from things that were not caused in a collision such as fire, vandalism, road hazards (rocks, animals, debris, etc…), and theft.

 

• Collision: Collision insurance covers damages to your car, whether you are the cause or the victim in a collision or other accident. This type of coverage is not required unless you have an outstanding lien with a loan provider. While collision is an option, if you are driving a new or expensive car, this type of insurance will help you to repair or replace it in case of an accident. It may not be as financially sound to carry this type of coverage on an older vehicle as oftentimes you can pay for a new vehicle of equal caliber with just a few months’ worth of payments and deductible amount.

 

• Emergency Road Assistance: The most common use of this part of a policy is for either getting a tow for a non-functioning vehicle or having someone come out to repair a flat tire or other car malady. Depending on the policy this type of assistance may include car rental coverage, but in other cases car rental insurance is a separate option.

 

• Car Rental Insurance: Car rental insurance offers a driver the option of getting a rental car in cases of loss, damages, or malfunctions on the insured vehicle. Typically, car rentals are offered at an extremely discounted rate and come with financial and time limits.

 

• Uninsured or Underinsured Coverage: If you are ever in an accident caused by someone who does not have an insurance policy or whose policy is insufficient to cover the minimum requirements mandated by the state for bodily injury expenses and damages incurred in an accident, your insurance company will help you pay for things like medical expenses, lost wages, and your pain and suffering. Without this type of insurance coverage, the only way you can recover damages is to get the uninsured or underinsured to pay you directly and full compensation is rare in the least.

Minimum Requirements by State

While the amount of auto insurance coverage lies mainly with the policy holder, all states have minimum car insurance coverage requirements for all motorists to protect drivers in the case of accident and injury. These requirements vary from state to state. Your driving habits or other considerations may also influence you to obtain higher coverage amounts. Talk to your insurance provider to best customize your policy to you and your family.

Note: Keep in mind that if you are the cause of an accident involving multiple cars or people, the insurance company will still only meet the requirements outlined in your policy. Make sure you have enough coverage for your driving practices. The best way to avoid personal financial liability is to be a safe, defensive driver and avoiding accidents.

Discounts and Reductions

With so much competition in the automobile insurance industry, companies are working very hard to offer you the best prices and rates possible. From instant quotations to online comparisons, it is easier than ever before to shop around for the insurance company that is right for you. By reading reviews, asking questions, and comparing new and existing companies, you will be able to find what you need at the lowest rates with the highest quality and coverage.

Offering discounts is one of the most cost effective ways for insurance companies to lower rates and secure your business. Not every company offers the same discount options. Make sure you know what discounts are available to you before you buy your policy. In addition to some of the possible discounts stated above, things like students maintaining good grades, motorists who drive infrequently and/or with low annual mileage, veterans, or federal employees. For a comprehensive list of discounts ask the insurer.

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