Auto Insurance

Auto insurance is required by law in most states, but deciding which types of auto insurance coverage to purchase can be a confusing process.  But being properly insured is an important part of protecting your financial position, so let’s take a look at the primary types of auto insurance.

• Liability – This is the auto insurance that is mandated by most states.  It covers the damages you cause to other people’s cars, property and bodies if you are at fault in an auto accident.  It does not cover damages to your own car.  There are two categories of liability coverage, and you need them both.  The first is “Bodily Injury Liability” which covers personal injuries to others in an accident in which you are at fault.  The typical industry standard coverage is $100,000/$300,000, which means for any one incident, you’re covered for $100,000 in bodily injury per person, and $300,000 in bodily injury total for all injured persons.  The second type of liability coverage is “Property Damage Liability” which covers damage you cause to another person’s car or property.  A typical coverage for property damage liability is $50,000 or $100,000.
• Medical Payments (or Personal Injury Protection) – This is auto insurance that provides reimbursement for medical bills of you and your passengers, regardless of who was at fault, and for resulting lost wages.  This coverage is optional in most states, and your decision to purchase it may depend on how good your health insurance plan is.
• Uninsured / Underinsured Motorist – This is the auto insurance that covers you and/or your car if you are in an accident caused by a driver with no auto insurance, or with inadequate auto insurance.  It is mandated in many states, and it’s generally a good idea to get it anyway.  A surprising number of drivers have no auto insurance, and of those who do, many carry only the state minimums, which may not be adequate.
• Collision – This auto insurance covers damages to your car in an accident in which you were at fault.  It is optional coverage, and your decision to purchase will likely depend on the value of your car.  Consumer Reports recommends that if the cost of the collision coverage is at least 10% of the value of your car, you should consider dropping it.  If you opt for collision coverage, you can help to keep your premiums low with a deductible of at least $500.
• Comprehensive – This is auto insurance that covers damage to your car caused by things such as storms, vandalism, rocks hitting your windshield, etc.  It also covers you if your car is stolen.  Again, if the cost of comprehensive coverage is at least 10% of the value of your car, it may not be worth it.  A $500 deductible will help to keep your premiums low.
• Rental Reimbursement – This auto insurance provides a rental car while your car is being repaired after an accident.  It’s generally not very expensive, but even at the low cost, it’s not a good deal for a lot of people.  You need to take into consideration your own situation, such as whether you have a second car, etc.
• Emergency Road Services – This will vary by auto insurance policy, but at a minimum will include towing reimbursement.  Again, this coverage comes down to a personal preference.  It’s generally not very expensive, but it may not be worth the cost.

In conclusion, as you determine which auto insurance coverages are appropriate for you, it is important to consider a number of factors, including your state requirements, the value of your automobiles, your personal net worth, and your own personal preferences.  By taking all of these factors into consideration, you can arrive at the appropriate auto insurance for your personal situation.

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