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Car Insurance Coverage Basics

It doesn’t matter which one of the fifty states you live in when it comes to car insurance. It is a necessary evil across the country. The purpose of car insurance is to protect drivers in the event of an unfortunate accident by ensuring the vehicles involved are repaired and medical expenses covered. It’s beneficial to understand the different elements of your car insurance policy when deciding how much insurance coverage to buy.

The basic elements of your car insurance policy include:

Liability. Liability is the basic coverage that pays for damages if you are found to be at-fault in an accident. It pays for both property damage and medical expenses up to the limit of your policy. It’s also there to protect you from getting sued after an accident occurs.

Collision. Collision coverage is an optional choice for most policies and covers car repair even if you are found to be at fault. You purchase a policy based on how much you want to pay out of pocket, known as the deductible before the insurance company picks up the rest of the bell. If your vehicle ends up being ruled a total loss and repairs are more expensive than the vehicle is worth, you’ll receive a check for the value of your car at the time of the accident.

Comprehensive. Comprehensive coverage is also optional. It pays for damages to your vehicle incurred due to anything besides another accident. This could be theft, fire, flooding, vandalism, or from a falling tree. Comprehensive and collision coverage are typically purchased together and required when making payments on a vehicle to protect the lienholder.

Personal Injury Protection or PIP. PIP is optional in some states and a requirement in others. It is required in all states that are a no-fault state. It is an additional type of medical coverage and if it isn’t required then you’re probably fine without it.

Uninsured Motorist. Uninsured motorist protection is responsible for paying the expenses if you’re involved in an accident with another person who doesn’t have an insurance policy. This is also something that can be utilized if you are involved in an accident where you are a pedestrian. This is a type of coverage that should be carried even if it’s not required because the small premium difference is well worth it compared to the costs of getting into an accident with someone who isn’t on an insurance policy.

Underinsured Motorist. Underinsured motorist coverage pays for costs incurred if you get into an accident with someone who isn’t carrying the required minimum liability limits for your state. It’s important to know and understand what the minimum limits for your state are to ensure that you purchase enough coverage to pay for everything after an accident.

So what actually occurs if you’re in an accident and don’t have the state minimum required for car insurance? You’ll be responsible for costs that are incurred after your insurance company pays the maximum limits according to the policy you purchased and open the door for a lawsuit. If you get in an accident and have the proper insurance coverage, you might be lucky enough to have your insurance company pay for court costs and representation. You won’t receive these benefits if you’ve used all of your coverage already.

Each state operates differently and insurers and consumers must ensure they’re complying with the minimum requirements. These basic elements are included in all automobile insurance policies and knowing how each work allows you to buy a policy that meets the minimum requirements and suits your needs.

It’s also recommended to compare quotes from numerous companies before purchasing a policy. Doing this right away helps save you money by guaranteeing that the price you’re paying is right for the level of coverage you’re getting.