Auto Insurance: Do You Have the Right Coverage?
By Ric Edelman
Auto policies offer a wide range of coverage. Have you really examined yours lately? Start with the “declaration page;” usually you receive it as part of your premium notice. If you can’t find yours, ask your agent or insurance company to send you a copy.
- The most important -- and state-required -- part of your policy is your liability coverage (Part A). This protects you against lawsuits arising from property damage or bodily injury for which you may be legally responsible due to an auto accident. Your liability coverage might be written as a single amount, which is the maximum your policy will pay, such as $500,000. Sometimes, coverage is written in split amounts, such as $100,000/$300,000/$50,000. The first number refers to the maximum coverage for injuries to one person. The middle figure refers to the maximum coverage available for all those injured in the accident, and the third figure is the maximum that will be paid for property damage to vehicles, structures, etc. Although each state sets the minimum amount of liability coverage that you must maintain, make sure your coverage is significantly more.
- Medical payment coverage (Part B) is optional and usually ranges from $1,000 to $10,000 per insured who is injured in an accident. The insured usually includes a spouse and children of the insured. In some states it also includes the insured’s non-family-member passengers. If you already have excellent health insurance, you can drop this coverage, which will save you money. However, you may prefer to maintain only enough coverage here to offset your heath insurance policy’s deductible, as well as its 20% co-payment requirement. Thus, you should review your auto policy in the context of your other insurance coverage.
- Uninsured and underinsured motorist coverage (Part C) pays for bodily injury and property damage when you or your vehicle is in an accident caused by an uninsured motorist or hit-and-run driver. This coverage may duplicate your health insurance and/or your collision coverage, but uninsured motorist coverage also can compensate you for “pain and suffering,” which the others do not.
- Collision and Comprehensive (Part D, also known as “other than collision”) compensates you for damage to your car regardless of who is at fault. Each portion has a separate deductible. The higher the deductible, the lower the cost, but the more you must pay out-of-pocket in the event your car is damaged.
- Some states require you to carry Personal Injury Protection. Unless it’s mandatory, avoid this feature – and its cost – by maintaining separate and more comprehensive health and disability insurance.
You can lower the cost of your auto insurance if you:
- have had no accident or ticket during the last three years
- are insuring more than one car with the same company
- have a teenage driver who has taken an approved driver education course and/or is eligible for a good student discount
- have a child who is in college and away from home most of the year
- maintain your homeowner policy with the auto insurer
- equip your car with anti-theft devices, air bags and/or automatic seat belts.
- are age 50 or older
- don’t drive to work
- commute less than ten miles to work
- buy a car with high safety ratings. Check on your car’s rating at the Insurance Institute for Highway Safety’s web site, www.iihs.org.