Are you planning to purchase auto insurance? Are you confused by all the coverage and policy options available?
Here’s everything you need to know to get the coverage that’s right for you at a fair price.
This coverage is required in most states. It pays for medical bills, lost wages, rehabilitation, treatment, and funeral costs for anyone injured or killed by your car. It will also pay damages if you are sued. This could be your most important coverage because if something really unthinkable happens in an auto accident — someone is seriously injured or killed — your finances could be significantly impacted if you have to cover their medical bills or are sued and you don't have the right level of coverage. A benchmark low-level for this coverage is $100,000 per person and $300,000 per accident, but you should think seriously about selecting a higher level.
Most states require this coverage. It pays to repair or replace another person's vehicle or property when it's damaged by your car. States typically require only $10,000 to $25,000 worth of coverage, but it can be a smart move to get a higher level of protection.
This coverage is required in about half the states. It reimburses you for medical costs, lost wages and in-home care that results from an accident. It covers both you and your passengers. Some people recommend purchasing the minimum level of this coverage if you have good health insurance. The problem with that is you could also be required to pay the medical bills of your passengers if there's an accident and you never know what kind of health coverage they have.
This coverage is required in many states. It pays medical bills, rehabilitation costs, and funeral expenses, as well as losses for pain and suffering for you or the passengers in your car when an accident is caused by a hit-and-run driver or someone who has little or no insurance. A good rule of thumb is to have coverage equal to the amount of bodily injury coverage you carry.
This is optional coverage, but it is one you should definitely consider. It pays to repair or replace your car if it's involved in an accident, no matter who or what caused it. It also pays to repair or replace your car if it's stolen or damaged as a result of a storm or other natural event.
Could you afford to repair or replace your car if it was seriously damaged or totaled in an accident? Most people can't — and that's why they need this coverage.
Collision and Comprehensive Coverage comes with a deductible. A deductible means that you will be required to pay some of the costs for repairing or replacing your car before the insurance kicks in. Choose the highest deductible you can afford to pay at any given time. Generally, a higher deductible results in lower insurance costs and a lower deductible means you will pay more for insurance.
Roadside assistance. This optional coverage pays to have your vehicle towed in the event of an accident or breakdown. It can also cover minor, out-of-shop repairs. If you already have an auto-club membership or your car's manufacturer provides this service for free, you don't need to pay for this extra coverage.
Rental reimbursement. This optional coverage typically costs $30 per year and pays for a rental car — usually for up to 30 days — if your vehicle is stolen or is in the shop for repairs because of an accident. There's usually a cap on the amount you're reimbursed per day and per occurrence. This coverage is worth it if you depend on your car to get to work.
These are some of the basic coverages most insurance companies will offer you. There are others that may come-up during the insurance buying process. You should take the time to talk to an insurance agent or do research online to find out whether you really need these coverages.