Although
there aren't set guidelines to what proper insurance coverage is,
understanding how your policy works can help you prevent a financial
nightmare when you need to make a claim.
There are six parts to the basic
insurance policy. They include bodily injury, personal property liability,
personal injury protection, comprehensive and uninsured
motorist.
Bodily injury and personal property liability are the
two major components of an
insurance policy that involve
liability coverage. These areas protect you against injuries caused to
another person or property. All 50 sates and the District of Columbia
require minimum liability insurance coverage. You can find out more
information about your state by contacting the National Association of
Insurance Commissioners. These requirements are listed as three numbers
that define how much the policy will cover on an accident.
The amounts are listed by the
thousand. California requires minimum liability coverage of 15/30/5. This
means that the insurance will pay up to $15,000 for any individual injured
in an accident, not to exceed $30,000 for all people injured and $5,000 is
paid for property damage.
You should be aware that most state
minimum will not provide sufficient coverage in the event of a serious
accident.
You should carry liability coverage
that is no less than 100/300/50. Then you will be able to provide $300,000
worth of injury coverage to all passengers, $100,000 to each individual
and $50,000 for property damages.
If you have substantial assets that
could be lost in a lawsuit, such as real property or financial portfolios,
you should consider a supplemental liability policy. This give you added
protection against any type of liability situation, whether in your car or
at home. For $150 to $300 a year in premiums, you can have up to $1
million worth of protection.
Personal Injury Protection covers both medical
expenses and lost wages for you and any passengers in your vehicle in an
accident. People with good medical and disability policies
may not need high PIP coverage. Instead, you should consider the lowest
coverage allowed by state law. This will keep you from paying for
unnecessary coverage.
Collision and Comprehensive
coverages add significant costs to your premium. Collision provides
coverage for losses or damages in any type of accident. Comprehensive
coverage insures your car in the event of a theft or natural
disaster.
If you have an older vehicle, the
cost of repairing your car is most likely more than its value. In that
case, you should waive both collision and comprehensive. The cost of the
coverage will outweigh the payoff for you.
On newer cars, set a deductible on
both your collision and comprehensive that is the highest amount that you
can afford to pay for repairs. The higher the deductible, the lower the
premium you will pay. Insurance professionals say that the majority of
policies carry a $500 deductible on collision and comprehensive claims.
Uninsured motorists coverage
protects you from accidents with motorists without insurance, and
hit-and-run accidents. This coverage will also kick in when an at-fault
driver doesn't have enough liability coverage to pay for the damages. Most
states require this coverage by
law.
