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Auto Insurance

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Policy Components

Certain types of auto coverages are required by state law, depending on where you live. Others are optional. Ask yourself how much do you actually need? Each type of coverage has its own premium. Add them all up and you’ve got the price of your auto insurance policy.

Bodily injury liability (BI) coverage covers you if you were to cause an accident in which someone else is hurt or killed. Laws differ from state to state as to how much you are required to carry. Many insurance experts recommend carrying at least $100,000 per person and $300,000 per occurance – commonly expressed as “100/300.” Consider what assets do you have to protect and what you can afford when deciding how much coverage to purchase.

Property damage liability (PD) covers you when you damage someone else’s property. Usually it’s someone else’s car, but it could apply to utility poles, garage doors, buildings and other physical property.

Collision covers damage to your car if you run into another car, a fire hydrant, or any other object involved in an accident. This coverage is not required by law, though your bank may require it if you have an auto loan. You can also choose different deductible amounts-this is what you must first pay out-of-pocket for a claim before the insurance kicks in and covers the rest.

Comprehensive coverage covers you in case your car is stolen or damaged in ways that don’t involve a collision. Coverage include hail, fire, theft, flood, earthquake, explosion, falling objects, and accidents with wildlife, such as deer. Comprehensive is optional, though your bank may require it if you have an auto loan. You may choose a deductible on this coverage as well.

Uninsured/Underinsured motorist (UM/UIM) coverage covers medical and other expenses when you are hit by a driver without adequate auto insurance. Whether this coverage is mandatory or optional depends on your state laws. You can purchase additional coverage to pay for damage to your car if hit by an uninsured motorist, but many people instead just purchase collision and comprehensive.

Medical payments coverage (Med Pay, or MPC) acts as primary coverage for medical expenses you and your passengers may incur if injured in a motor vehicle accident, regardless of fault. 

How do I read my auto insurance policy?

Your insurance policy is a legal contract, so  it can seem confusing. But, if you know what to look for and where to find it, your policy will become a lot easier to understand. Each auto and homeowners insurance policy has three standard parts:

Declarations Page. This is where you’ll find your name, a statement of the policy period during which you are covered, and the amount of premium you pay. The “dec” page also includes a description of the different insurance coverages provided and provides the maximum dollar limit the insurer will pay for a claim under each coverage.

Insuring Agreement. This is the main part of your policy. It describes what the insurance company will do in exchange for the premium you’re paying. The insuring agreement will also spell out who is covered: The persons named as insureds on the declarations page, residents of the same household and persons using the car with the permission of the insured. Everything is listed specifically in an attempt to avoid misunderstanding. Read the definitions section and the list of exclusions that apply to each coverage. Its vital that you know what you are covered for, and what’s not covered, when you need to use your insurance policy!

Conditions of the policy. This section describes your responsibilities when you have a claim, for example how much time you have to report it and what documentation you must give to the insurance company. It explains the terms for canceling your policy—both for you and the insurer. You can cancel your policy at any time, however your insurance provider may only cancel under certain conditions providing you with advanced notice.

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