The ABC’s of Auto Insurance
Auto insurance is a must for anyone with a car. Most states require it by law, lenders require it, and your financial security depends on it as a safety net. The ABC’s of auto insurance is a primer on what kind of coverage is available, not a debate on whether it’s necessary.
Reality check: While no one is thrilled by monthly premiums, it’s just not worth the risk of going without auto insurance¹ to save a few dollars – the costs of collisions, injuries, fines, license suspension, and more threaten your assets and financial stability without the protection of insurance!
There is more than one type of auto insurance coverage to choose from – some coverage is mandatory, some is optional, and there are coverage ranges within those options as well. Understanding what’s required and what’s optional will help you to compare quotes and choose the right coverage for your situation.
Basic coverage required across the country:
- Bodily injury liability – this pays for injuries you cause to another person
- Property damage liability – this pays for damage you cause to property, including structures, vehicles, objects, etc.
Depending on your location, you may also be required to purchase coverage for:
- Uninsured & underinsured motorists – this is exactly what it sounds like – this covers costs if you’re hit by someone without any, or enough, insurance, or a hit-and-run accident
- Personal injury protection (PIP) or medical payments – this covers medical expenses for you and your passengers, and also may cover lost wages and funeral expenses
Lenders often require additional coverage beyond the basic liability coverages listed. Additional coverage should also be considered for high-value vehicles owned outright, or if you have concerns about the potential impact of costs incurred outside of an accident.
- Collision coverage – this covers vehicle collision damage whether from another vehicle, object, building or structure, road hazards like potholes, and rollovers
- Comprehensive coverage – this covers damage outside of a collision, including: hail, animals, wind, and theft, and possibly covers windshield repair or replacement
The ABC’s of auto insurance are simple, now that you’re familiar with the terms, and you know that cutting corners with auto insurance is a disaster waiting to happen (We have better ways to save money!). Protect your assets, your passengers, and yourself by purchasing the right coverage for your financial situation.