Although there aren't set guidelines
to what proper insurance coverage is, understanding how your policy
works can help you prevent a financial nightmare when you need to
make a claim
There are six parts to the basic
insurance policy. They include bodily injury, personal property
liability, personal injury protection, comprehensive and uninsured
Bodily injury and personal property
liability are the two major components of an insurance
policy that involve liability coverage. These areas protect you
against injuries caused to another person or property. All 50 sates
and the District of Columbia require minimum liability insurance
coverage. You can find out more information about your state by
contacting the National Association of Insurance Commissioners.
These requirements are listed as three numbers that define how much
the policy will cover on an accident.
The amounts are listed by the
thousand. California requires minimum liability coverage of 15/30/5.
This means that the insurance will pay up to $15,000 for any
individual injured in an accident, not to exceed $30,000 for all
people injured and $5,000 is paid for property damage.
You should be aware that most state
minimum will not provide sufficient coverage in the event of a
You should carry liability coverage
that is no less than 100/300/50. Then you will be able to provide
$300,000 worth of injury coverage to all passengers, $100,000 to
each individual and $50,000 for property damages.
If you have substantial assets that
could be lost in a lawsuit, such as real property or financial
portfolios, you should consider a supplemental liability policy.
This give you added protection against any type of liability
situation, whether in your car or at home. For $150 to $300 a year
in premiums, you can have up to $1 million worth of
Personal Injury Protection covers
both medical expenses and lost wages for you and any passengers in
your vehicle in an accident. People with good medical and disability
policies may not need high PIP coverage. Instead, you should
consider the lowest coverage allowed by state law. This will keep
you from paying for unnecessary coverage.
Collision and Comprehensive coverages
add significant costs to your premium. Collision provides coverage
for losses or damages in any type of accident. Comprehensive
coverage insures your car in the event of a theft or natural
If you have an older vehicle, the
cost of repairing your car is most likely more than its value. In
that case, you should waive both collision and comprehensive. The
cost of the coverage will outweigh the payoff for you.
On newer cars, set a deductible on
both your collision and comprehensive that is the highest amount
that you can afford to pay for repairs. The higher the deductible,
the lower the premium you will pay. Insurance professionals say that
the majority of policies carry a $500 deductible on collision and
Uninsured motorists coverage protects
you from accidents with motorists without insurance, and hit-and-run
accidents. This coverage will also kick in when an at-fault driver
doesn't have enough liability coverage to pay for the damages. Most
states require this coverage by