Auto insurance protects you against financial loss if you have an accident.
YOUR COVERAGE OPTIONS
All policies include liability coverage, which protects you financially if you are responsible for an accident. This is required in most states. You can also buy optional coverage to protect your investment in your car, pay your medical bills, or even help if your car breaks down.
Here's a list of coverages and a brief explanation of what they do.
Pays for your legal responsibility to others if you injure someone or damage someone's property in an accident.
Pays to repair damage to your car when you hit, or are hit by, another vehicle or object, regardless of who's at fault.
Pays to repair damage to your vehicle that's caused by something other than a collision, such as fire, theft, vandalism, or hail. It also pays for damage to your vehicle caused by hitting an animal.
When you buy collision and comprehensive, you choose a deductible--typically $250 or $500. This is the amount you pay to the repair shop. Insurance Company pays the rest. You may want to opt for a higher deductible as a way of lowering your premium.
Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.
States don't require you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.
UNINSURED/UNDER INSURED MOTORIST BODILY INJURY (UMBI)
Pays for your medical expenses, when you're hurt in an accident caused by a driver who has insufficient or no insurance.
UNINSURED MOTORIST PROPERTY DAMAGE (UMPD)
Pays to repair damage to your vehicle caused by a driver who doesn't have car insurance.
MEDPAY (ALSO KNOWN AS MEDICAL PAYMENTS)
Pays for the cost of reasonable and necessary medical care you get as the result of an accident, regardless of who's at fault.
PERSONAL INJURY PROTECTION (PIP)
Pays for medical bills and -in some states-other living expenses while you heal if you are unable to work as a result of an accident, no matter who's at fault.
Pays for your rental car while your car is being repaired as part of a comprehensive or collision claim.
Pays for repairs or towing when your vehicle breaks down due to mechanical or electrical issues, a dead battery, or a flat tire; you're locked out of your car; your vehicle runs out of gas; or your vehicle gets stuck in the snow or mud.
Reimbursement to you when your vehicle is towed.
LOAN/LEASE PAYOFF (ALSO KNOWN AS GAP)
Pays the difference between the settlement amount and the amount you owe the bank if your vehicle is declared a total loss. This difference can easily be several thousand dollars for newer cars, which tend to depreciate in value quickly.