Key Components of Auto Insurance
Collision Coverage covers the cost of repairing or replacing your vehicle if it’s damaged in an accident with another vehicle or object, such as a tree or guardrail. Unlike liability insurance, which covers the other party’s costs if you’re at fault, collision coverage is designed to reimburse you for damage to your own vehicle.
Comprehensive coverage in an auto insurance policy provides protection against damages to your vehicle that are not caused by a collision. This can include events such as theft, vandalism, natural disasters, and contact with animals. Unlike liability and collision coverage, comprehensive insurance covers losses that are often beyond the driver’s control.
Uninsured/ Underinsured Motorist Coverage
Personal Injury Protection (PIP)
Frequently Asked Questions:
Q: What is a deductible?
A: A deductible is the amount you pay out-of-pocket before your insurance kicks in. For example, if you have a $500 deductible and $2,000 in repairs, you pay $500 and your insurer pays $1,500.
Q: Do I need full coverage?
A: It depends on your financial situation, the value of your car, and whether you can afford repairs or a new car if yours is damaged or stolen.
Q: What are state minimums?
A: State minimums are the least amount of liability coverage you must have to legally drive. However, these often offer insufficient protection.
Q: How can I lower my premium?
A: Increasing your deductible, bundling insurance policies, and maintaining a good driving record are a few ways to lower your premium.
Q: What happens if I’m at fault in an accident?
A: Your liability coverage will pay for the other party’s expenses up to your policy limit. You may also have to pay out-of-pocket if the costs exceed your coverage.
How to Read Your Auto Insurance Coverage
- Person A has medical expenses of $200,000.
- Person B has medical expenses of $150,000.
- The damaged car repair costs $50,000.
- Both Person A and Person B’s medical expenses would be covered because each is below the $250,000 per person limit.
- However, the total bodily injury expenses ($200,000 for Person A + $150,000 for Person B = $350,000) exceed the $500,000 per accident limit. You would be responsible for the amount that exceeds this limit, which is $350,000 – $500,000 = -$150,000 (you’re over by $150,000).
- The property damage to the car would be fully covered as it’s below the $250,000 limit for property damage.
How an Umbrella Policy Integrates with Your Auto Insurance
What It Covers
An umbrella policy kicks in where your auto insurance leaves off. If you are at fault in a major accident and your liability coverage has a limit of $300,000, but you are sued for $1 million, your umbrella policy will cover the $700,000 difference.
Frequently Asked Questions:
Q: Is An Umbrella Policy Expensive?
A: Umbrella policies are generally cost-effective, considering the amount of additional coverage they provide. Premiums may range from $150 to $300 per year for $1 million in coverage.
Q: Do I Need An Umbrella Policy If I Already Have High Liability Limits?
A: Even if you have high liability limits on your auto insurance, an umbrella policy can offer further protection for extreme cases where those limits are not sufficient.
Q: Can One Umbrella Policy Cover Multiple Properties And Vehicles?
A: Yes, a single umbrella policy can extend over your auto insurance, homeowners insurance, and even boat or RV insurance, offering comprehensive protection.