Insurance Coverage
Consumer Tips

Key Facts about Insurance Coverage you should know

While you have probably been covered by an auto insurance policy since your teens, you may not fully understand the ways in which such a policy works. Ultimately, the insurance coverage you have likely has a number of typical components.

Liability Coverage

Most jurisdictions require drivers to purchase liability insurance at the very least. This is designed to cover damage you cause to other individuals or property while behind the wheel. It must be noted, though, that this type of coverage will not pay for injuries you sustain or those suffered by others who are included under your policy. PIP insurance is necessary for that, and it will be described below.

It is common for an insurance carrier to give a price quote for liability insurance in terms of three distinct figures, such as 50/200/25. To understand what this means, consider the following:

The initial figure in the series represents the number, in thousands, how much the policy will cover for each individual harmed in the incident (other than yourself).

The second figure is the total coverage cap for each claim event.

The final figure is the total (in thousands of dollars) payable for property damage caused in the accident.

Keep in mind that auto insurance involves more than simply the liability aspect.

Industry experts may suggest that a driver purchase liability coverage that equals their actual net worth. This is often a prohibitively expensive proposition, particularly on an individual policy. Rather, it may make sense to purchase an umbrella type of policy in order to obtain additional liability coverage beyond that contained in an auto or home policy. I am endeavouring to gain additional knowledge about umbrella policies, but am happy to share my current base of knowledge on the subject.

Collision and Comprehensive Coverage

Not surprisingly, collision coverage is meant to pay for vehicle damage that occurs when you are involved in an accident. However, cars can sustain damage in ways other than traditional collisions, so comprehensive coverage pays for harm caused by fires, theft, flooding and the like.

Comprehensive and collision coverage can be smart ideas for newer-model cars, and if a car is still under a finance contract, they may in fact be mandatory. Older vehicles may not need coverage of this sort, and purchasing it may be throwing money down the tubes. Thus, if your current car is a old beater, consider getting rid of comprehensive and collision coverage if you have it.

PIP (Personal Injury Protection) Coverage

Often referred to as "no-fault" coverage, PIP insurance is mandatory in a number of states. This coverage provides payment for medical expenses and sometimes lost employment wages if you suffer serious injury in a car accident. Policies of this sort may provide coverage for passengers within your vehicle and pedestrians as well.

Uninsured Motorist Coverage

As the name implies, this type of coverage is designed to pay for losses sustained to you and any passengers if you happen to be involved in an accident caused by another motorists who lacks insurance. It can also be used in instances of hit-and-run crashes.

Achieving Car Insurance Premium Savings

Paying hundreds, perhaps thousands of dollars annually on car insurance can be a real strain. The fact is that you may be charged too much for your existing coverage. According to Consumer Reports, a bit of extra research and legwork to could produce substantial monthly savings for many insurance purchasers. Ideally, you want to compare car insurance at every opportunity.

I recently offered some handy advice on how to save on all sorts of insurance coverage. Some additional ideas include:

Cancel coverage for towing costs. Roadside assistance and towing coverage is something that can be self-insured by most everyone. By maintaining your vehicle, you can likely avoid breakdowns and subsequent tows, making this type of insurance coverage unnecessary. Further, towing that is necessitated by an accident will likely be covered under collision insurance, but it is wise to check to make sure before cancelling existing towing insurance.

Engaging in advance planning pays dividends. Make sure to spend some time researching and obtaining multiple price quotes prior to making a vehicle purchase. Premium prices vary based on the likelihood of theft for a given model, how often serious damage is incurred by drivers of certain cars and the number of safety features that are integrated on different vehicles. The cost of repairs and outright replacement will also dictate policy prices, so check with insurance carriers to determine which cars will cost the least to cover.

Credit monitoring is key. Carriers often review the credit histories of customers to set premium prices. While this may seem unfair, credit records can be solid indicators of claim frequency. While it is not possible for rates to be changed mid-policy for those who pay in a timely fashion, they can be adjusted upward for new vehicle purchases, and credit history may play a role in that.

Monthly payments can add unnecessary cost. Carriers tend to charge extra to customers who wish to pay on a monthly basis. Instead, it makes good sense to pay for a policy in one, perhaps to lump sums. If monthly payment is still desired, taking advantage of automatic payment features can still serve to reduce costs to a certain degree.

While sports cars are almost certain to cost more to cover than small sedans or a motorhome, it is still possible to limit expenditures by keeping a good driving record. Because accidents are what drive the majority of insurance claims, carriers favour drivers who stay out of trouble on the roads.

Other possible sources of insurance savings include participation in safe driving classes, low-mileage price breaks and other similar programs. Just inquire with prospective carriers to make sure you realize all possible discounts.