How To Understand Your Car Insurance

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Car insurance – One of those things you have to have but hate to pay for. But what is it, exactly, that you’re buying? Below, you’ll find a brief explanation of the main components of your policy.

First, you need to have your car insurance policy in front of you. The main portion of your car insurance bill comes from the liability or ‘financial responsibility’. This coverage is what covers ‘the other guy’ in the event of an accident. In Pennsylvania, this is usually broken down into three numbers (i.e. 25/50/15) The first two numbers refer to ‘bodily injury’. 25 ($25,000) is the maximum amount that one person can be awarded for bodily injury or death that is caused by you in the event of a car accident. 50 ($50,000) is the maximum total amount that can be paid out for bodily injury for any one accident. The $50,000 would have to be divided between 2 or more people involved in the accident. Remember- the most any one person can receive is $25,000. The last number, 15 ($15,000) refers to property damage. This is the maximum amount that can be awarded to cover the damage you cause to other’s property (i.e. car, tree, fence). These numbers will vary greatly depending on your coverage selections and your insurance needs. Other examples of the numbers you may see are: 100/300/100, 25/50/25, 15/30/5 – No matter the number, each still refers to the bodily injury and property damage limits.

Comprehensive & Collision – These coverages usually have a number written next to it. This refers to your deductible or, the amount you will pay out of your pocket before the company pays. These coverages are usually required if you have a loan on your vehicle. Although your state doesn’t require this coverage, your financial institution will. This ensures that they will be compensated in the event your vehicle is a total loss. You may also choose to keep this coverage if you do not have a lien on the vehicle. This coverage is what is used when you have physical damage to your vehicle. After you have paid your deductible, the company will pay (within reason) to have your vehicle’s damages repaired.
Comprehensive coverage is what covers your vehicle when damage occurs that is out of your control. (i.e. hitting a deer or having a tree fall on your car)
Collision is what covers your vehicle when you hit something with it. (i.e hit the guard rails after sliding on ice or hitting a tree)

Some states require you to maintain uninsured and under insured motorist coverage. This covers you and your passengers. It is utilized if someone else causes an accident with you and doesn’t have enough insurance to cover the damages they caused. If you carry this insurance, it should also have a number next to it. It is similar to the bodily injury, discussed in step 1 of this article.

Locate optional coverages- Optional coverages are not necessarily required by your state. These coverages include (but are not limited to) rental car, accidental death or funeral expense. Again, your policy will vary depending on the state you live in, the company you are insured with and the coverages you had chosen when the policy was written. Some insurance companies also offer additional coverages like pet coverage.

Your insurance policy will vary dependant on the coverage limits, options and the vehicle you are insuring.

A lot of companies offer different kinds of discounts and coverages. It doesn’t cost anything to get a quote and ask questions so make sure you understand what a company is trying to sell you.

Keep in mind that each state has it’s own laws about the minimum coverage you must keep. Be sure to visit your states department of motor vehicle’s web site to check those limits. I have included a dmv directory site in the resources section of this article.

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