Most states require you to have all of your automobiles insured. Auto insurance consists of several coverage parts some of which are optional while others are required by the law. There are also certain minimum amounts of coverage that you may be required to purchase. Based on the condition of your automobile and your personal financial situation, you can determine the appropriate amount of auto insurance coverage. Note that coverages are different for personal and commercial vehicles. If an auto with a personal auto insurance policy has an accident while being used for a commercial activity, then the coverage may not be valid. Following are 4 main sections of the personal auto policy to help you decide on the types and amounts of coverage.
This coverage pays for bodily injury or property damage to the other party caused by your automobile. Most states require you to have this coverage. Coverage specified in this section applies to each occurrence. Bodily injury part generally has 2 sub-parts: per person (typically $50,000) and for all bodily injuries in an accident (typically $100,000).
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What this means is if in an accident only one person from the other party is hurt and this person's medical treatment exceeds $50,000, the insurance company will only pay $50,000. You may be required to pay the rest (if accident is proved to be caused by you). Similarly, if in a given accident, several people are injured, then insurance company will only pay $100,000 in total. It is quite common to see people having $100,000/$200, 000 coverage for bodily injuries. The property damage portion covers damages to the other vehicle or other property at the scene of the accident. The limit for this coverage is also per occurrence. The minimum for this is about $25,000. Generally, people purchase a higher amount of coverage for property damage.
This coverage is optional and pays for the bodily injury of your car and your car's occupants. Coverage limit is generally per person, per occurrence. So, if you have taken the coverage for $10,000 then each injured person in your automobile is eligible for up to $10,000. Even if you have a medical insurance for yourself and your family member, it may be worth carrying this insurance just in case you end up giving a ride to someone who doesn't. The premium portion for this section is generally small.
Despite auto insurance policy being required by law, there are always a significant number of motorists on the road without an insurance. This could happen due to a variety of reasons e.g. non payment of premium, ignorance on insurance, or inability to pay the premium. If an auto driver without insurance or without adequate insurance causes the accident then you may not get anything from him/her. This insurance provides the coverage for the damage of your auto and bodily injury you suffer if the accident is caused by an uninsured or under insured driver. This part also covers damages caused by an unidentified hit and run driver.
This coverage is also called Collision and Comprehensive. It is an optional coverage. Collision coverage covers the damages to your auto if you were at fault. The collision may be with another vehicle, tree or any other structure. Comprehensive coverage on the other hand, covers for damages from sources other than a vehicle and that's not in auto owner's control. This includes perils like falling objects, fire, theft, vandalism, riots, earthquake, storm, or being hit by a bird or animal. Although it is an optional coverage but for a new vehicle or a vehicle in good condition you must buy this coverage.
