Auto Insurance - Do You Know What You Are Covered For?

Auto insurance in most states is a requirement by law - no insurance, no license. But understanding what type of insurance to buy or if you already own a policy, understanding what it is you have, can be tricky. So here are some basics.

1. Liability Coverage. This coverage, which is required in most states, compensates the driver of the other car and its passengers in the event you get into an accident. There are two types of liability insurance; one is Bodily Injury Liability Coverage and the other Property Damage Liability Coverage. Bodily injury liability is sold in standard increments that designate both how much coverage you have per person in an accident, with an additional limit per accident. For example, if you buy bodily injury worth $100,000/$300,000, each of the people you injured could be compensated $100,000, but only up to $300,000 per accident. Property Damage Liability on the other hand is coverage that will pay for the repair and replacement of the other guy's car or property in the event of an accident. State-required minimums are as low as $5,000, but if you total somebody's Lexus, that won't begin to cover the damage. Most professionals such one is better off with a minimum of $50,000 for each vehicle you own. And to be truly safe, you should have a total of $100,000 coverage.

2. Personal Injury Protection. PIP coverage pays for the medical and funeral costs associated with an accident for you and your family - regardless of whose fault it was. But if you already have separate health, life and disability policies, you can probably forgo this one altogether. Check those policies first, but chances are those sort of expenses are already covered.

3. Uninsured or Underinsured Motorist. This coverage pays for medical and funeral costs for you and your family in the event you get in an accident with either a hit-and-run driver or a driver who doesn't have enough auto insurance. These policies usually cover bike and pedestrian accidents, too. Given the prevalence of uninsured drivers nationally, this coverage is essential. On average, it costs less than $40 a year for $100,000 worth and will make up for anything your medical insurance doesn't cover.

4. Collision and Comprehensive. Collision reimburses you for the full cost of repairs or replacement of your car after an accident. Comprehensive covers you in the event your car falls victim to a natural disaster, vandalism or theft. With either coverage, the lower the deductible you choose, the more the policy will cost you. The purpose of insurance is to protect you against big losses, not to make you whole to the last dollar. If you have an older car, you might drop this coverage altogether. Collision and comprehensive - which can account for 30% to 40% of your total premium - are cash-value coverage. That means if your car is damaged, the most you'll recoup is the Kelley Blue Book value, which declines precipitously as your car ages. Here's a good rule of thumb: If the cost of your collision and comprehensive is more than 10% of your car's Blue Book value, it probably makes sense to drop these coverages and save a tidy sum. With most cars, you should approach this limit as the car turns five years old. Understand, however, that if you eliminate the coverage, you'll have to foot the repair bill if you get in an accident that's your fault, or if the car is totaled or stolen.

5. Extras. There are many extra items one can add to their policy. Before buying the extras, weigh them against your need. For instance, sonsider rental-car reimbursement, which pays $15 or so a day while your car is in the repair shop after a collision. Another extra is towing coverage. Towing coverage can cost $25 or more per year on a policy. If you are traveling a lot out of town, this could really pay off as towing is charged by the mile to the nearest mechanic. A last extra that is almost a must is Full glass coverage. Auto glass is expensive and an errant stone can ruin a $500 windshield in the blink of an eye.

To understand why type of insurance you may need, talking with an agent about your lifestyle and work, your budget and expectations, will help considerably. For instance, lets say you own your own business - does this mean you will need Commercial Auto Insurance? If you are conducting business and using your own vehicle, you could be in danger.

A good insurance agent will ask you many questions about how you use vehicles in your business, who will be driving them and whether employees, if you have them, are likely to be driving their own cars for your business.

While major auto coverage is the same, a business auto policy differs in many technical respects. For instance, if you have a personal umbrella liability policy, there's generally an exclusion for business-related liability. So are you safe?

Here are some examples of ways you may get into trouble without a commercial policy:

- Pizza and newspaper delivery;
- Catering;
- Door-to-door consulting services;
- Landscaping or snowplowing services
- Day care/church van services.
- Real Estate Agents

If your business uses a vehicle, or many vehicles, you will want to ask your insurance professional some important questions such as:

- What are my liability limits? In general, a commercial auto policy can offer higher liability limits. Larger vehicles, such as delivery vans, can cause more damage than passenger cars.

- Does my personal policy cover me for issues specific to my business? For example, if you have a trailer that damages another vehicle while on a job, a personal liability policy may not cover the repairs. A commercial policy will.

- Do I have employees who drive my vehicles? In general, if other people drive your vehicles for work, you need a commercial auto policy.

So what does your automobile insurance look like and are you covered for all of your needs? If you aren't sure, pull your policy out and talk to your agent once again, just to be sure.

Article Source: http://www.freeliveknowledge.com

ClickInsure.com is a leading broker for health, life and auto insurance in California. When you need great advice or want to compare auto insurance quotes be sure to visit www.clickinsure.com/ online.

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