Understanding Auto Insurance Policies

by Joey Hudson

You should have automobile insurance, whether or not it is required by law in your state. Understanding your auto insurance policy can be difficult, but is necessary in order for you to make sure that you have adequate coverage and that you are getting the best rate. Not all auto insurance policies are alike, which is why it is important for you to know your automobile insurance policy.

Collision coverage is the amount received for your car following an accident. This will have the policy deductible removed before receiving it. Ideally, collision coverage should equal the value of the car at the time the policy is in effect. Cars depreciate in value over time so the collision insurance coverage should not exceed that value. This will ensure that the coverage is not costing more than the car is worth. Premiums should be reduced annually to account for the depreciating value of the automobile.

Comprehensive coverage pays for damages to your car in case of theft, accident or natural disaster such as a tree falling on the car. There will be deductibles based on collision coverage and comprehensive coverage that are normally the same amount. The higher the deductible, the more money saved on your premium.

While you are not required to carry collision or comprehensive coverage in any state, there are certain states where you are required to carry liability coverage. This pays for any costs for others, including medical damages as well as vehicle coverage, in case you cause an accident. States that require liability coverage usually have a minimum of coverage that they require.

Liability coverage includes bodily injury to any party involved in the accident. The limit for bodily injury is around $100,000 with an aggregate of $300,000. Each individual injured in an accident may receive up to $100,000 in damages. A maximum limit of $300,000 is established any claim. These amounts may be increased or decreased as deemed by the policyholder and affects policy premium.

Liability coverage includes damage to vehicle and other property. Some personal property covered under a liability policy includes homes, vehicles, personal items, and mailboxes. Coverage for property damage may be $50,000, with an aggregate of $100,000.

Again, this amount is subject to your own discretion. You must make sure that you have the proper amount of coverage required by law, if you live in a state where liability coverage is mandated.

Understanding your automobile insurance policy can help save money. This may be accomplished with larger deductibles and established levels of coverage. To ensure an adequate amount of coverage, review your insurance policy and read it carefully. Make sure that you have enough coverage in case you are in an accident or in some other catastrophic event so that you do not have to pay personally.

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