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Insurance is protection -- providing drivers with the financial resources to deal with personal injury and damage to your vehicle, thus avoiding catastrophic losses and shielding your assets from liability if you're at fault in an accident. So, while $50,000 or $100,000 may seem like a lot of liability protection, it's not. You have to ask yourself how much is your future security really worth.
Auto insurance policies have the following elements in common:
Liability - or who's at fault. If you are at fault, your insurance policy protects you against the cost of injury and damages caused to you and to third parties. Auto insurance liability limits are commonly expressed as a series of three numbers - 1/2/3, where "1" is the maximum bodily injury coverage per person, "2" is the total bodily injury coverage per incident, and "3" is the maximum property damage limit.
All states have established minimum insurance requirements that drivers are required to purchase in order to legally operate a vehicle. However, these minimum levels of coverage are very rarely adequate coverage for households with traditional assests.
Collision - Pay for damages to the insured vehicle and is normally the most expensive portion of the insurance coverage. Collision coverage is traditionally limited to the depreciated value of the vehicle, which is different from a vehicle's actual replacement cost. Collision premiums can be greatly reduced with higher deductible (the amount that you must pay BEFORE the insurance company pays).
Comprehensive - Pays for all non-collision damages to the vehicle and its contents, and normally includes theft, break-ins, vandalism and natural disasters.
Medical - Pay for medical expenses for all covered parties and are normally made regardless of who's at fault, although the insurance company may seek to recover such expenses from another party, if that party is proven to be liable for the accident.
Non-Owners Car Insurance - If you don't own a car and borrow someone's or rent one regularly, you should consider this coverage. You can learn more about it at www.nonownerinsurance.org.
Personal injury protection and "no fault" policies are expanded forms of medical coverage that are required in some states. Insurance companies also offer expanded medical coverage that includes lost wages, child care payments, etc.
Uninsured Motorist - Inexpensive, and covers injuries if you are hit by an uninsured driver. Required in many states.
Additional Coverage - These supplemental coverages are available from most insurance companies:
- Vehicle Replacement guarantees that your vehicle will be completely repaired or replaced, even if it exceeds the depreciated cost of the vehicle.
- Rental Car Reimbursement covers the cost of rental vehicles required due to theft or damage of the insured vehicle.
- Towing Coverage covers towing and labor in the event of mechanical breakdown.
- Underinsured Motorist enables you to increase liability payments for injury and property damages in the event that the other party has insufficient coverage.
Discounts - Insurance companies offer many discounts, including the following:
- Good/Safe Driver Discount - no accidents or tickets for a specific period of time.
- Multi-Car - for multiple vehicles in a household on the same policy.(15%-20%)
- Multi-Policy - for having home and auto with same company.
- Mature Driver - for drivers age 50-55.(10%-20%)
- Supplemental Restraint - air bag equipped vehicles may qualify for up to 30% reduction in medical coverage portion.
- Anti-Theft/Security Device - for alarms, ignition cutoff, wheel locks, hood locks, etc.(5%-15%)
- Non-Smoker - may qualify for discounts for liability, medical benefits and collision.