PERSONAL AUTO INSURANCE/CAR INSURANCE

Car insurance offers drivers valuable protection. It is very flexible in the way it is constructed and protects the policyholder from extreme financial loss. Almost all states have a mandatory minimum for auto liability insurance; however, laws vary, so check with your independent agent on the required level of coverage.

Auto Liability Insurance

Liability insurance covers injuries and property damage done to others in an accident for which the policyholder is at fault. Policies differ, but it is common for them to offer:

• Repair coverage for the property of others,

• Medical payments to others injured by a named driver’s accident,

• Lost-income coverage,

• Victims’ rehab or disability expenses, and

• Death benefits.

The costs resulting from an accident can be astronomical and can lead to bankruptcy without help from an automobile insurance policy. Liability insurance can cover the policyholder as well as other named individuals living in the household who are authorized to drive the insured vehicle. It can also be written to cover “permissive-use” drivers (those who borrow the vehicle but are not listed on your policy). However, that coverage may be limited, as “permissive-use” is not the same as regular use.

Drivers who are away at school or on deployment may be eligible for reduced liability coverage during their absence if they will not be driving, so mention such residency changes to your agent.

Liability insurance will also cover the policyholder’s use of another vehicle, such as a rental, though some costs, such as the rental company’s loss of income from that vehicle while being repaired, might be excluded. For those costs, you would need the insurance the rental company offers.

You may also wish to purchase medical expense benefits for the passengers of your vehicle injured in an accident. Typically listed as Part B — Medical Payments, this optional coverage is an affordable addendum that helps with a set maximum payout for hospital and rehabilitative services, funeral expenses, and lost income. It can help prevent your being sued for such costs.

Car Insurance That Covers Collision Damage

When your vehicle is in an accident, collision coverage can help with repair costs. If the worst happens and your car or truck is totaled, it will also cover the value of the vehicle, whether on an actual cash value basis or a replacement cost basis. With actual cash value, any depreciation will be calculated and subtracted from the replacement cost. The benefit is this coverage is often less expensive. The drawback is you will get less from a settlement.

You don’t have to buy collision coverage, and some people decide when their vehicle reaches a certain age that collision coverage isn’t worth it. However, premiums do drop as a vehicle ages, so many people choose to keep collision coverage. If you have a new car, you may wish to buy gap coverage. It covers the difference in what you owe on a loan or lease and the vehicle’s actual cash value. It’s especially valuable if your new car is totaled or stolen.

Car Insurance That Covers Other Damage or Loss

Speaking of theft, collision insurance will not respond if your vehicle is stolen, vandalized, or damaged by something other than a crash, like a fallen tree or a flood. For that protection, you need comprehensive coverage added to your car insurance policy. Many car insurers will include windshield-only insurance in comprehensive coverage or allow you to add it.

Another common source of loss is from hit-and-runs. Ask your insurance agent about these incidents. It’s likely you will need uninsured motorist coverage (known as UM/UIM coverage), which typically carries a lower deductible than collision and comprehensive coverage and may include protections for damage to your vehicle as well as expenses related to injuries you suffer. Uninsured motorist coverage also responds if an at-fault driver damages your vehicle and stays on the scene.

Remember that during difficult economic times, some households let their auto insurance policies lapse. Also, if people have received serious driving tickets or have had their license suspended, they may only be taking the lowest mandated limits or are driving without insurance due the cost of the high-risk pool.

Also worth noting is that most standard umbrella policies are strictly “Third-Party Liability,” which means they only pay out to other people if you are at fault. To get coverage that pays you when someone else hits you and doesn’t have enough insurance, you typically need to have a specific uninsured motorist endorsement added to your policy. An agent can help you coordinate your coverage.