How Auto Insurance Coverage Can Save You Money
According to the National Highway Traffic Safety Administration, there were over 6 million auto accidents in the US in 2015 alone. Of those accidents, ~35,000 resulted in fatalities, ~2.5 million in injuries and ~4.5 million in property damages. In most states, buying auto insurance is required, but with or without it, every driver has a probability of getting into an accident and the consequences can be financially devastating. A solid auto insurance plan will make sure that you, your family, and other passengers will be protected in unexpected auto accidents.
Types of Auto Insurance Coverage Explained
When you are shopping for auto insurance coverages that are right for you, it’s important to know the different types of plans that can be tailored to your specific needs. A typical auto insurance policy usually includes six types of auto insurance coverages, and the three most common are liability, collision, and comprehensive because they provide the broadest protection for the most common claims. Here are a few of the coverages with an explanation of how they work and what they cover.
Liability coverage has two components: bodily injury liability (helps pay for medical costs related to another person’s injuries) and property damage liability (helps pay for damage you cause to another person’s property while driving). It’s important to note that this specific coverage does not cover you or your passengers as a result of the accident. Licensed drivers are legally required to purchase at least the minimum amount of liability coverage set by state law.
Collision insurance covers damage to your car in accidents usually involving another vehicle or inanimate object. It may help with the costs in repairing or replacing a vehicle and extends to damage caused with an object (for example, a tree or house). It’s important to note that in most states, you must buy collision insurance to buy comprehensive insurance but it is optional. But it may be required if you are leasing or financing your car.
Comprehensive insurance helps pay for damage to your car due to incidents besides collisions, such as vandalism, windshield damage, natural disasters, or striking an animal. Like collision, it is completely optional but if you live in areas that are prone to violent weather, areas that have high crime rates, or areas with a lot of animal traffic then it’s safer to have coverage for accidents that are out of your control. You may be required to carry it if you are leasing or financing a car.
Uninsured/underinsured motorist insurance can protect you and your car against uninsured drivers. Many drivers choose to carry the minimum in liability coverage to save money, or may not carry any insurance at all. If you're hit by a driver who is uninsured, uninsured motorist coverage will help with coverage or if you're hit by an under-insured driver, under-insured motorist coverage may help. Uninsured and underinsured motorist coverage requirements vary by state.
Medical payments coverage can help pay the medical bills for you, your passengers, or family members in the car with you at the time of the accident, regardless of who is at fault. Covered costs may include hospital visits, surgery, physical therapy, X-rays and more. Medical payments coverage requirements vary by state.
Additional Auto Insurance Coverage to Consider
Gap insurance is optional but it can help pay off your car loan if your car is totaled or stolen and you owe more than its value (which is all insurance will pay out). Gap insurance will pay the dollar-amount “gap” between the balance of your financing and what your car is worth.
Emergency Roadside Assistance coverage option will help you if you lock yourself out of your car, need a tow, need a jump start, if you get a flat tire, or run out of gas. If your car is inoperable, you can get a tow to a nearby garage of your choice.
Rental reimbursement insurance helps pay for a rental car if your current car cannot be driven. There are limits on how much an insurance company will pay, but it will be enough to cover a rental for the full amount of time your car is being repaired.
Why You Should Consider Having Auto Insurance Coverage
If you are found at fault in an accident, you may be held reliable for all the costs associated with it. These costs may include legal fees; medical expenses for you, your passengers, and the other parties; or the cost of damages to your car and the other driver’s car. Auto insurance (liability coverage, collision coverage, and medical payments coverage) may help pay for these costs.
Without any auto coverage (or adequate liability limits), you would have to pay these costs out of your own pocket, and if you cannot pay, the court will seize your assets as payment. Not all accidents will result in a court battle, but if you have assets you wish to protect or if you are afraid of getting into an accident and not having money on hand to cover heavy expenses, it’s safer to get ahead of the curve and purchase a policy.
Accident Scenarios and Your Car Insurance Options
When you are shopping for car insurance coverages, consider the different situations in which you might need to rely on auto insurance.
You Injure Someone in a Crash: Let’s say you’re terrified of spiders, and as you’re driving alone, you see a spider crawling along your dash. You instinctively move to kill it and you collide into another car. This accident results in the other driver sustaining injuries which can end up costing you a lot of money. In this case, if you have liability insurance with sufficient limits, bodily injury coverage will cover the medical costs for the other driver and any damage done to property. If you have medical payments coverage, it would cover you if you sustained any injuries too.
Fallen Tree Damages Your Car: Let’s say that strong winds uprooted a small tree that lands on your car and damages it. Your car is worth $10,000 and you have a $1,000 deductible. With comprehensive insurance, you will receive a $9,000 check from your insurance company to pay for any damages, but if you don’t have comprehensive coverage, you would pay the full amount out of pocket.
You’re Involved in an Accident With Someone Who Is Uninsured: Say you’re grabbing a coffee before work and there’s currently one open parking spot at Starbucks and as you turn into it, a young teen tries to beat you to it but ends up swiping your car. Everything is cordial but as luck would have it, the driver that hit you is uninsured. Unfortunately, they cannot cover the costs to repair your car but you have uninsured motorist insurance so your damages are covered.
You Need Emergency Roadside Assistance: Say you and your friend are joyriding and singing along to music. You both lose track of time and forget that there is not enough gas for the drive back and there’s not enough fuel to get you to a gas station. You can call for assistance and wait till someone can bring gas to you or tow you if needed.
Whatever situation you find yourself in, it’s good to be prepared. Use SmartFinancial to get help with comparing auto insurance quotes or speak with one of our specialists today. They can help you better understand what each coverage offers so you can put together a policy that's right for you. To get the best prices begin by comparing car insurance quotes and enter your zip code below.
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