An auto insurance policy is a contract between you and an insurance company. You pay a premium to them, and in return they agree to cover certain expenses in case of accident or other covered loss.
An insurance policy typically contains a page that outlines its coverages, dollar limits, and deductibles. It also explains the cancellation process.
Liability Coverage
Liability coverage shields you from claims by others for damages caused by an accident that was your fault. This type of policy is usually included as part of an auto policy, but it may also be purchased separately.
Most states require drivers to carry liability insurance that provides at least $25,000 for injuries to one person, $50,000 for multiple injuries and $10,000 for property damage – this is commonly referred to as 30/60/25 liability coverage.
Ideally, you should opt for higher limits than your state’s minimum requirement in case of an accident. Furthermore, consider getting medical payments and personal injury protection (PIP) to cover both your own and other passengers’ medical bills in case of a mishap.
Collision Coverage
Collision coverage provides financial assistance in the event that your car is damaged in an accident with another vehicle or object, like a guardrail. It’s often included as an extension to basic auto insurance policies.
Your insurance can also provide assistance if your car is stolen or totaled.
If you lease or finance your vehicle, your lender may require that you purchase collision coverage.
Collision coverage pays to repair or replace your car after it has been damaged in a collision, regardless of who was at fault. You may also qualify for a collision deductible waiver which waives your deductible if an uninsured driver hits you.
Comprehensive Coverage
Comprehensive auto insurance coverage protects your car against damages that aren’t caused by collisions. This could include fire, floods, falling objects, theft and vandalism.
Comprehensive coverage isn’t a legal requirement in all states, but it can be beneficial to have on your policy if you own or lease a vehicle. Not only does this cover repairs, but it also offers rental reimbursement if you need a replacement vehicle while yours is being fixed.
When deciding whether or not to purchase comprehensive coverage on your car insurance policy, there are several factors to take into account such as the value of your vehicle, its age and your budget. Furthermore, consider what deductible amount best suits your needs – will paying out-of-pocket money in case of an accident be worth it?
Uninsured/Underinsured Motorist Coverage
Uninsured/Underinsured Motorist Coverage provides financial coverage in the event of an accident with a driver who does not have insurance, covering both medical and property damage costs. This type of policy is commonplace in states with high uninsured/underinsured driver rates.
Uninsured/Underinsured Motorist (UM) and UIM may be combined into one policy by your auto insurer. This can be a great advantage that they typically offer, making it convenient for you.
It is always wise to have some amount of uninsured/underinsured driver coverage included in your auto policy, particularly in New York where there are often many uninsured motorists on the road.
Medical Payments
Medical payments coverage (MedPay) is an optional add-on that can help cover medical expenses resulting from an auto accident. It extends coverage to drivers, passengers and pedestrians injured in accidents.
MedPay can assist with covering health insurance deductibles and copays, emergency room, X-ray and surgery fees as well as ambulance charges for rehabilitation or nursing care.
Health insurance copays can be a great way to cover any gaps between your medical insurance and out-of-pocket maximums, but they should be balanced against your budget and current savings levels. Assess whether your deductible is too high and if you have enough in savings for an unexpected emergency.