It's frequently expensive and can be hard to understand. Here's a brief explanation of coverages and some ways to save.
When you buy or renew auto insurance, you receive a declaration page listing all vehicles and people covered by the policy and the types and amounts of coverage provided. However, what's meant by each coverage category isn't necessarily apparent.
For example, Bodily Injury means other people's bodies, not yours - people your car may injure. It pays for such things as medical bills and legal costs.
You have liability if the accident is found to be your fault. The "Liability Limits" listed for this type of coverage are in two categories: "Each Person" and "Each Occurrence." The bad news: The policy pays no more than the amount listed, no matter what the bill comes to. You're stuck for the rest if it's more. The good news: If you get into another accident tomorrow, then another one next week, the limits apply all over again for each accident.
Medical Payments covers injuries to you and passengers in your car, without regard to who was at fault in the accident. It can go toward ambulance and funeral costs in addition to actual medical payments.
Uninsured Motorist covers you up to the limits you select if you're in an accident with an uninsured or underinsured motorist who is at fault (and up to 15 percent of motorists nationwide are uninsured, according to the Insurance Research Council). Essentially, you're buying insurance for the other guy.
Property Damage covers what your car hits (another car, a building, etc.), not your car.
Comprehensive covers loss (subject to a deductible) to your car not caused by a collision, such as damage due to vandalism, theft, or fire.
Collision covers damage to your car caused by a collision. As a rule of thumb, if your car's damaged while moving, collision coverage applies. Collision payment doesn't involve determination of fault. It also is subject to a deductible.
All Risks typically includes coverage for mechanical breakdown. Many insurance companies do not offer it.
Be aware:
When you lend your car, you can be held responsible for liability incurred if there is an accident. If you lend your vehicle, be sure it's to a responsible driver.
To be sure of coverage, you should list all the drivers in your household.
How to save some money:
Before buying a car, ask your insurance company how much the models you're considering cost to insure. For example, a Honda Civic with a sticker price roughly half of a Cadillac's can cost the same to insure for comprehensive and collision coverages, because Civics are more likely to be stolen and fare worse in collisions.
Shop around for coverage.
Some owners of older vehicles, cars that may not be worth much, find it cost-effective to drop collision coverage. Note: Lenders require this coverage.
Raising deductibles on comprehensive and collision can lower the premiums. As with dropping coverage altogether, this depends on your comfort level in living with increased risk of incurring out-of-pocket expense.
Your insurance company may offer discounts. Typical discount categories include Good Driver, Mature Driver (generally for those age 55 and over), Multi-policy, and Good Student. Ask.
When comparing policies, investigate what extra coverages may be included. For example, some policies cover you for comprehensive and collision in rental cars. Some policies provide for a rental car while your car is being repaired after an accident.
Insurance companies determine rates on such factors as your driving record, how long you've been a licensed driver, how much you drive, where you live, and what you drive. Your best bet is to be a middle-aged person who has driven for 30 years, lives in a low-risk community, drives a nondescript car sparingly, and never gets tickets.
