The first step to saving money on insurance is assessing coverage under your current policy. Some items are required by law, and more coverage may be warranted depending on your situation. The National Highway Traffic Safety Administration reports historic lows in traffic fatalities since 2008, but there are still an average of 12 million accidents each year. Protect yourself from the risk of financial catastrophe, and possibly save some cash on premiums, by understanding your coverage.
Liability Basics
Nearly every state requires drivers carry liability insurance. Even the exceptions require drivers provide proof of their ability to cover minimum liability costs. These policies are expressed in three numbers, such as 15/30/15, and you should be aware of the meaning.
Bodily Injury
The first number is the maximum liability payment for an individual’s injuries in an accident for which you are at fault. The second number is the total for all injuries.
Property Damage
The third number is the total payout for damages caused by your vehicle in an accident.
State Requirements
States establish minimum liability requirements. Keep in mind that you can be sued for damages exceeding these minimum payouts. It is generally a good idea to purchase extra liability insurance and reduce the cost with a higher deductible.
Collision and Comprehensive
Not all auto damage occurs in an at-fault accident, and this is why finance companies require motorists to purchase comprehensive and collision insurance for the life of a loan. Comprehensive protects you in case of theft, vandalism, or damaged caused by weather events. Collision insurance always includes comprehensive, and it pays for damages in the event of no-fault collisions with other objects or vehicles.
Rider Policies
Many other types of insurance are often bundled with a policy, but you may have to purchase them separately depending on the carrier. Some are redundant depending on your other insurance policies, such as accidental death and dismemberment.
Personal Injury Protection
PIP policies are often part of the state minimum requirements. Drivers with existing medical coverage need only purchase the legal minimum. This policy pays your medical expenses to a pre-set limit regardless of fault.
Medical
It is usually better to simply purchase a separate health insurance policy. Medical coverage under an auto policy will only pay in case of an accident and regardless of fault.
Uninsured Motorist
Unfortunately, some drivers break the law and have no liability insurance. If you only carry liability, this means paying your expenses out of pocket or filing a civil suit against someone likely unable to pay the bill. This minimal policy is a good idea for anyone carrying only liability.
Rental Reimbursement
What do you do when you still need to go to work and pick kids up from school after an accident? Few people budget for out-of-pocket rental fees, but insurance may cover this expense.
Check your policy for redundancy and coverage gaps. Insurance protects you from financial disaster, but only if you have the right type in sufficient quantity.
About the Author: Miranda Lowe lives and writes in London. She writes for www.carinsurance.org.uk where you can find more information on car insurance, trips, and tips for saving money when you drive.
