Auto Insurance Coverage Guide

The premise behind an auto insurance policy is a distinct level of coverage for bodily injury liability and property damage liability from homeowner's insurance. Bodily injury liability provides protection for injuries caused by an automotive accident while property damage liability covers damage caused by an automobile to public and private property. The only area of overlap between homeowner's and auto insurance policies comes with an automotive accident on private property.

Your search for new auto insurance should start and end with a low premium price. Insurance companies use a number of factors to determine insurability including past driving history and geographic pricing restrictions. You need to utilize a similar system to locate an auto insurer that provides adequate coverage from the accident through to the final bill.

Selecting the Right Insurance Company
Most drivers have a fairly good idea about what type of auto insurance coverage they need. Drivers with families and individuals who possess a large amount of personal property need to have policies that go well beyond state insurance minimum requirements so that their financial and personal assets are fully protected. Individuals who do not have a lot of assets would be well advised to carry higher financial limits on certain aspects of their insurance policy in order to maintain and protect their livelihood (income). Auto insurance premiums should be considered an investment towards a secure financial future.

While the overall cost of an auto insurance policy is an important factor when choosing your coverage, it should not be the only factor. You want to be certain that you are getting the best value for the money you spend and this means doing some homework and learning about the different types of coverage offered and what discounts you may be eligible for.

Your investment in an insurance policy means that you are purchasing a virtual stake in whichever company you select. A well-managed and financially secure company can provide better service to its policyholders- a very important consideration when and if you ever file a claim. Some simple research into public trading of a company's stocks as well as a quick call to your state's insurance regulator can help you recognize an insurance company's value in the market as well as the company's legal ability to sell policies in your state.

Your initial list of insurers will become smaller as you do more research about each specific company. A final list of three auto insurers is recommended before you progress into the premium quote stage to avoid excessive mailings, e-mails and phone calls from insurers to whom you have expressed interest. It is important to compare your three final insurers on the same level of insurance coverage and customer service to find the right policy for your needs.

It is critical that you have the right information when asking for premium quotes to get an accurate price. Your driving record, including any accidents and traffic violations in the past, is important to help an insurance company determine the level of risk involved in providing a policy. You also need to keep a tally of annual mileage and mileage from home to work and back as a measure of the amount of time you spend in your car. Insurance companies will also need the make, model, mileage and safety features of your car to help generate an honest premium quote.

Benefits and Coverage
A good way to approach different benefit and coverage types is to make a benefits matrix. You can place combinations of benefit types in the vertical axis and the name of the insurer in the horizontal axis to keep track of premiums based on different coverage levels.

The key to choosing the right benefit and coverage types when formulating your new insurance policy is reviewing other insurance policies you currently possess. Your employer-provided health insurance may provide adequate financial coverage for emergency situations and you may be able to decrease your medical payments benefit to lower your premium. You also need to anticipate the billing and claims process following an accident to avoid unnecessary confusion. The relatively low expense of medical payments compared to other benefit types means that you may want to purchase medical payments with your insurance policy to streamline the claims process.

There are six main types of automobile insurance coverage which you should focus on and consider when formulating a new insurance policy:

  • Liability Insurance - This covers property damage and bodily injury to others for which you are held legally responsible.
  • Bodily Injury Liability - This coverage pays legal bills and claims fees if you are involved in an accident where your car contributes to the injury or death of another motorist. You can cover other drivers of your vehicle under this liability as long as you provide expressed permission.
  • Collision - This coverage pays off bills for repairs of your vehicle if you collide with another vehicle or a piece of property without consideration of responsibility.
  • Comprehensive Physical Damage - Comprehensive coverage for physical damage to your vehicle includes payment for repair bills made necessary by vandalism, natural causes and other issues falling outside the purview of other benefit types.
  • Personal Injury Protection (PIP) / Medical Payments - This provides additional insurance protection for any subsequent healthcare costs that are a direct result of an accident, no matter who is at fault.
  • Uninsured/Underinsured Motorist - This benefit type protects you and your family from accident-related injuries caused by a motorist who lacks insurance entirely, has inadequate insurance coverage or leaves the scene of the accident without contacting law enforcement.

While the coverage options listed above are considered some of the best choices to include in a complete and comprehensive auto insurance policy, there are many other types of coverage which you should be aware of and consider. Your driving habits and personal circumstances are important factors in determining the overall content of your insurance policy. To put together a policy which is designed specifically with your needs in mind, you might want to look over the following auto insurance choices which are also available:

  • Property Damage Liability - Your purchase of property damage liability helps pay attorney fees, court costs and other costs associated with an accident involving damage to another person's property.
  • Medical Payments - Medical payments cover hospital bills if you or your beneficiaries are injured in an accident. This coverage provides medical payments if you are a passenger in another vehicle or receive injuries from an automobile while acting as a pedestrian.
  • No-Fault Auto Insurance - This coverage allows you to recover any losses to you and/or your vehicle regardless of who is at fault.
  • Fire/Theft Insurance - This is usually included within a comprehensive policy and is the most expensive auto insurance available- but it gives you the most protection for your vehicle.
  • Physical Damage Insurance - This coverage protects against most types of damage to your vehicle but does not include normal wear-and-tear or regular maintenance services.
  • Guaranteed Auto Protection (GAP Insurance) - This coverage protects you from depreciation if your vehicle is damaged or totaled before you pay off your loan.
  • Rental Car Insurance - This protects you from financial liability if you have an accident while driving a rental car.
  • Pay-Per-Mile or Pay-As-You-Drive (PAYD) - This coverage is based on actual miles driven.
  • Any Auto Liability Insurance - This provides coverage for all vehicles listed on a business owner's commercial vehicle policy whether they are owned, non-owned, or hired.