Auto Insurance Basics
1. What are the main components of auto insurance coverage?
A typical automobile insurance policy has three components:
- Liability
- Medical
- Collision/comprehensive.
Liability coverage protects you if you are held responsible for an accident that causes injury or loss to other people. Medical coverage pays medical and hospital bills for you and the passengers in your car. Collision/comprehensive coverage pays for damage to your car due to an accident, theft, or damage from vandalism or fire. All of these coverages are limited to the amount stated on your policy.
2. What does auto liability insurance cover?
If you injure someone or damage a vehicle or other property in an auto accident, your liability insurance will pay the person’s medical expenses and the bills to repair the vehicle or property. Auto liability, technically known as "bodily injury liability" and "property damage liability," protects you if you are held responsible for an accident.
Liability protection can account for more than half of an insurance policy’s cost. Without adequate protection, however, you could easily lose everything you own, including much of your future earnings, if you are sued successfully.
3. Liability: What does “250/500/250” mean?
$250,000 medical coverage per person
$500,000 per accident
$250,000 property damage
4. Why do I need medical payments coverage under my automobile insurance policy if I have health insurance?
If you already have good health insurance, you won’t necessarily need medical payments insurance to cover your own medical bills. But you may want to consider purchasing it for any passengers in your car. If you live in a no-fault state, you probably have to buy a minimum amount of medical coverage called "personal injury insurance" or "no-fault" insurance. This coverage pays your medical bills, and, in some cases, your loss of income if you are disabled, regardless of who is to blame for an accident. If you don’t live in a no-fault state, you don’t have to purchase medical payments coverage, but you might want to consider buying it anyway. Liability insurance doesn’t cover accidents in which no one is proven negligent, nor will it cover your injuries in accidents that you cause.
Recommend: $5,000, maybe $2,000
5. What’s the difference between collision and comprehensive auto coverage?
Collision coverage pays for damage to your car from an accident. Comprehensive insurance covers damage caused by fire, flood, theft, tornado, and just about any other physical damage not covered by collision. In all states, both of these coverages are optional. However, if you have a car loan or are leasing your car, the lender or dealer will require you to carry collision and comprehensive coverage.
6. Why should most people carry high deductibles with comprehensive/collision?
Higher the deductible, the lower your premium; usually, you don’t want to turn in small claims because your insurance may go up.
7. What is uninsured motorist coverage?
Uninsured motorist coverage pays you if an uninsured motorist hits your car and you are injured. Similarly, underinsured motorists coverage protects you if the driver who crashes into your car has some -- but not enough -- insurance. In some states, uninsured coverage can boost the total premium substantially.
Quoted like liability: 250/500/250
8. What influences the cost of auto insurance?
Age, type of car
Good credit rating
Amount of coverage
Type of car
Damage that a vehicle historically places
How often type of auto is stolen
How vehicle protects passengers
9. What vehicles are among the cheapest to insure?
10. Use MoneyCentral’s Insurance Planner to see if you have the “right” auto insurance.
Source: Many answers from