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Old 05-09-2006, 12:58 PM   #1
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General Auto Insurance 101

All of us will have some dealings with the auto insurance company at one time or another. It can be daunting, especially for a first time car buyer, to deal with and understand all the issues. Here is a quick overview of the coverages generally available in the US; of course this list is not all inclusive, and you should always consult your agent or insurance professional for exact details and laws of your state.

This coverage is used when you collide with another vehicle or object, such as a house or fence, or if another vehicle hits yours. In some states, this coverage will be used if you strike an animal.

Collision pays only for your vehicle, and is often an optional coverage. Your loan company may require that you maintain collision coverage, since until the loan is paid off they have an interest in the vehicle. Collision can be used whether you or the other driver is at fault.

Comprehensive (sometimes called "Other than Collision")
This coverage is as defined; "Other than Collision". Mudslides, floods, hail, fire, tree branches, broken windshield, and other things not specifically excluded by the policy are covered under this optional coverage. Comprehensive covers only your vehicle.

The deductible for Collision and Comprehensive is the amount you will be responsible for each time you use these coverages. Higher deductibles (where you are accepting a certain amount of $$ for each accident) result in lower rates for insurance; however don't fall in the trap of having your deductible so high that you can't pay it in the event of an accident. It's better to pay a bit more for your insurance than to only receive 1/2 of the money you need to get your car repaired and be stuck with your vehicle in the repair shop.

This mandatory coverage takes care of damages to someone else's property or person if you are at fault in an accident. It is a good idea to have a large amount of coverage here. States have a minimum amount that you can carry; however in some states the amount is ridiculously low. Example: Pennsylvania requires drivers there to carry only a minumum of $5,000 of liability coverage for damage to others' property. If you have this amount and are found at fault, the maximum your policy will pay to the other driver/property owner is $5K. We all know the price of cars today and that is clearly inadequate - since after your policy pays the $5000, you'll be stuck paying the rest! Wrapped into this coverage is not only the property damage amount discussed above, but also the Bodily Injury portion; medical bills can add up very quickly, especially when a hospital ER visit is involved, and the other person may seek pain and suffering, which is part of their claim against you (again, if you are at fault).

Some states lump all these together, while others have separate amounts for each one.

Whether it is called PIP or Medpay or has some other name, there is usually some sort of medical coverage available in case you are in an accident. Laws vary by state, but in general this coverage is no-fault, which means you can use it without penalty to your insurance premium. This coverage takes care of you, and usually your passengers if you're injured in an accident - regardless of who is at fault. Again, laws vary by state and there can occasionally be circumstances that will cause your passengers to fall back on their own coverages. As always, check with your insurance professional so you'll be informed.

No Fault
I never handled a no fault state, but in these states you usually take care of your own vehicle, regardless of fault in an accident. If you live in a no fault state then make sure you get a very good explanation of how the insurance works.

Again, just an general overview of your basic auto insurance policy. I didn't go over anything like towing and rental because these are generally pretty straightforward.

Got a vehicle? Get good insurance and be sure you understand it. Don't be nervous about asking questions about your coverage; a good insurance agent shouldn't brush you off and should be able to explain, in required detail, everything about your policy.
13 F150, 5.0 4x4 SuperCab, 68k
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Last edited by fredjacksonsan; 01-19-2010 at 05:18 PM.
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