Reading auto insurance policies can be like trying to decipher advanced
calculus. It's really not that difficult if you understand a few basic
terms. Collision, Comprehensive, Bodily Injury Liability and Property
Injury Liability are the main terms you need to fully understand.
You'll appreciate Collision Coverage in the event you need repairs or
replacements if your vehicle collides with another vehicle or property.
The higher the deductible you elect, the lower your premiums will cost
you. If you're at fault for something, well of course it would still be
an accident, as I doubt you'd plan to run into that guard rail, but how
much would you be able to afford to pay out of pocket for repairs?
$250? $500? $1,000? Just like medical insurance, you'd have to pay that
deductible amount first and then the insurance company would pay for
the remaining charges for the repair.
Another term to become intimately familiar with is Comprehensive
Coverage. This is the coverage that pays for damage caused from falling
objects, fire, certain natural disasters, theft and vandalism.
Deductibles work the same way as with Collision; the more out of pocket
costs to you, the less your insurance premium.
In addition to knowing how much Collision and Comprehensive coverage
you have, you'll want to know about your liability coverage. Let's say
you rear-end another driver. Or your foot slips off the brake onto the
gas pedal and you plow down a mailbox. Your liability coverage will
kick in and pay for the damages that you caused with your insured
vehicle. You liability coverage will, or could, include bodily injury
(people) and property damage.
You don't want to go without Bodily Injury Coverage. If you were at
fault in an accident and others involved needed to go to the hospital
and/or lost wages from missing work, those costs would come out of your
pocket if you are not insured with Bodily Injury Coverage. It doesn't
take a genius to know how quickly those amounts can add up. This type
of coverage can also help you in the event the other party takes legal
action against you. Many states require you to carry Bodily Injury
Coverage.
The other part of liability includes Property Damage coverage. Can you
imagine how much it might cost should you accidentally drive into the
side of someone's home? You wouldn't want to be caught without property
damage insurance should you need to pay for repairs to another vehicle,
building or anything else you might hit. As with Bodily Injury
coverage, Property Damage coverage also helps protect you in the event
of a related lawsuit.
Every policy will have its limits and various degrees of coverage. It's
important that you understand the basics of what you are paying for and
why it is necessary. No one plans for an accident, be prepared!
