Car insurance is designed to protect you, your family and your vehicle when your car is damaged or if you’re involved in an auto accident. Coverage also protects your assets if you are found responsible (liable) for causing the accident.
While car insurance sounds complicated, there are a few basic elements that form most auto insurance policies. We’ll break down the terms to help you understand how all the pieces fit together.
While actual requirements vary by state, most basic auto insurance policies include these four elements.
1
Liability Coverage
Nearly every state requires a car owner to carry liability coverage, which pays for the damage you do to others. It is broken down into two types—Bodily Injury and Property Damage.
If you cause an accident that injures other people, your Bodily Injury Liability coverage pays for their medical bills, lost wages, legal settlements, and pain and suffering. Property Damage Liability coverage pays for damage you cause during the accident to someone’s property, such as their vehicle or a tree, telephone pole or building.
Liability coverage is often shown as three numbers, such as 100/300/100. This translates to $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident and $100,000 in property damage coverage per accident.
Consider your needs carefully when choosing coverage. The minimum requirements for auto liability coverage in some states are too low to protect the assets of many Alaska USA member drivers. A good insurance broker can help you choose the right amount for you and your family.
2
Collision and Comprehensive Coverage
This coverage pays for damage to your car.
Collision pays for damage done to your car when you hit something, like another vehicle. It even covers damage from road hazards, such as potholes, or if your car rolls over.
Comprehensive coverage covers most losses other than collision and includes things such as theft, hail, flood, fire, and vandalism. In addition, if you hit a deer, damage to your car is taken care of by your Comprehensive coverage. Costs of repairing damaged windshields and other glass breakage are usually also covered by Comprehensive.
3
Uninsured/Underinsured Motorist
Uninsured and underinsured motorist coverage provide bodily injury and property damage coverage if the other driver who caused the accident is either not insured or has insurance but doesn’t have enough coverage. Uninsured coverage also pays if the accident is caused by a hit-and-run driver.
4
Personal Injury and Medical Payment Coverage
Medical costs can add up quickly if you are injured in a car accident. Medical Payment Coverage (MPC) pays just the medical expenses for you or those who were riding in your car if they are injured, regardless of who caused the accident; it also pays if you hit a pedestrian or a bicyclist.
Personal Injury Protection (PIP) coverage, which is broader than Medical Payment Coverage but not available in all states, pays for medical expenses as well as items like lost wages, childcare if needed and funeral expenses.
Protect yourself
Always consider your family's health and financial well-being when buying car insurance, so that you don’t have to pay out-of-pocket if costs from an accident exceed your coverage. Requirements for auto insurance vary by state; a good insurance broker can make recommendations that work for you and your budget. Request a quote today to get started.
Did you know?
Your credit rating impacts the amount you will pay for car insurance; better credit means lower rates. It pays to build and maintain good credit.
You may save money by paying the entire amount of your annual car insurance premium instead of paying just a portion of it every month.
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