insurance

Demystify your auto insurance policy

There are no standard guidelines when it comes to insuring your vehicle. However, understanding the basic components of your auto insurance policy may help you save some green the next time you file a claim.

Regardless of your insurer, your auto insurance policy may include the following components:

  • Bodily injury liability/personal property liability: These two components offer the policyholder protection against injury to another person and property in the event of a car accident. Minimum requirements vary by state, but every state requires motorists to carry at least some liability coverage. Experts generally recommend carrying liability coverage of at least 100/300/50, which pays up to $100,000 for any single person injured in the crash, up to $300,000 for all injured passengers and $50,000 for property damage. To find out how much liability coverage your state requires, visit the National Association of Insurance Commissioners' website.
  • Personal injury protection: This type of insurance pays your medical expenses and lost wages -- as well as that of your passengers -- if you're injured in a car accident. If you have decent health and disability insurance, you probably want to consider the lowest PIP coverage required by your state.
  • Collision/comprehensive: Collision insurance provides coverage for damage or loss of your car if you have any type of accident, regardless of whether you run over your neighbor's mailbox or slam into another vehicle. Comprehensive insurance, on the other hand, only covers your car if it is stolen or is damaged during a natural disaster. For new cars, experts recommend calculating the maximum out-of-pocket cost you can afford to pay for repairs and setting that as your deductible. For older cars, it often makes sense to waive this coverage.
  • Uninsured motorist: As its name implies, uninsured motorist insurance protects you if you get into an accident with a driver who does not have auto insurance, or who does not carry sufficient liability insurance to pay for your damages. It also covers you if you are the victim of a hit-and-run.

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