Car Insurance Coverage

Car insurance is like any insurance in that you want to limit your exposure to expenses that are unlikely but could ruin you financially if they do happen. When picking car insurance coverage you need to know not only what your chances of loss are, but also what is your likely expense for that loss.

The first thing that comes to mind is the value of the car. If you paid $20,000 for a vehicle and it was totaled in a collision, could you afford to go and buy another $20,000 replacement? Most people would say no, and would want to pay a small amount over a long time as insurance against that possibility. And how many times do you think you would have such a total loss? Probably once in a lifetime, but that one time is all it takes. However, if your auto was worth about $2000 you might decide it's not worth insuring its replacement value. You might end up paying insurance premiums that reach the value of the car in a few years. So insurance coverage for collision damage repair depends on the value of your car.

The next most likely loss that comes to mind is an injury in a collision. Modern cars' crash worthiness and features are designed primarily to protect the occupants. As Saab used to say, the car should give its own life to save its passengers. But even non-fatal injuries can result in expensive medical bills. Insurance coverage for medical payments is prudent and may not be fully covered by your health insurance policy.

Another type of loss you could be involved in is damage to another person's car, property, or injury to its occupants. You might have to pay for that as well. This situation is covered by third party property damage and bodily injury insurance.

A risk that does not involve a collision at all could be just as financially crippling. That is, your car might be stolen and never recovered, or recovered wrecked, or it could be vandalized, weather damaged, damaged while parked, or burned. This type of loss is covered by comprehensive insurance.

Uninsured motorist coverage applies when the insured vehicle is damaged by an uninsured motorist. Underinsured coverage applies when expenses are higher than the amount of coverage of the at fault person.

Most major insurance companies offer all these types of coverage, plus several add-ons that are for convenience, such as towing and car rental.

Understanding what your choices are and what you have at risk will help you decide what coverage you need and how much you can afford.

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