Insurance - What and Why

Reading auto insurance policies can be like trying to decipher advanced calculus. It’s not really that difficult if you understand a few basic terms: Collision, Comprehensive, Bodily Injury Liability and Property Injury Liability are main terms you need to fully understand.

The higher the deductible you elect, the lower your premiums will cost you. Just like medical insurance, you’d have to pay that deductible amount first and then the insurance company would pay for the remaining charges for the repair.

You’ll appreciate Collision Coverage in the event you need repairs or replacements if your vehicle collides with another vehicle or property.

Another term to become intimately familiar with is Comprehensive Coverage. This is the coverage that pays for damage caused from falling objects, fire, certain natural disasters, theft, and vandalism. Deductibles work the same way as with Collision; the more out of pocket costs to you, the less your insurance premium.

In addition to knowing how much Collision and Comprehensive coverage you have, you’ll want to know about your liability coverage. Let’s say you rear-end another driver. Or your foot slips off the brake onto the gas pedal and you plow down a mailbox. Your liability coverage will kick in and pay for the damages that you caused with your insured vehicle. You liability coverage will, or could, include bodily injury (people) and property damage.

You don’t want to go without Bodily Injury Coverage. If you were at fault in an accident and others involved needed to go to the hospital and/or lost wages from missing work, those costs would come out of your pocket if you are not insured with Bodily Injury Coverage. It doesn’t take a genius to know how quickly those amounts can add up.

This type of coverage can also help you in the event the other party takes legal action against you. Many states require you to carry Bodily Injury Coverage.

The other part of liability includes Property Damage coverage. Can you imagine how much it might cost should you accidentally drive into the side of someone’s home (if, for example, your brakes fail?)

You wouldn’t want to be caught without property damage insurance should you need to pay for repairs to another vehicle, building, or anything else you might hit. As with Bodily Injury coverage, Property Damage coverage also helps protect you in the event of a related lawsuit.

Every policy will have its limits and various degrees of coverage. It’s important that you understand the basics of what you are paying for and why it is necessary. No one plans for an accident, be prepared!