Auto Liability Insurance
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Is Auto Liability Enough
by Gary Foreman
A Viewer asks: I have liability insurance on my car. I know my
coverage will take care of the other party. But does my liability
pay for anything else after I have a wreck? Thanks. Kathryn K.
The simple answer to Kathryn's question is no, liability insurance
only pays for the other guy's losses. But, let's take this opportunity
to look at what types of coverage are available and what each
one does.
First, consider what types of damage can be done when you're
involved in an auto accident. Obviously, there could be damage
to your car and to the other car. There could also be injuries
to you, the other driver or passengers in either car. And, finally,
bystanders or their property could suffer loss. Damage to any
of these could cause you financial loss. For most of us, auto
insurance is the method that we use to protect against that
loss.
Next, let's review the different types of coverage you can buy.
Your state may require a minimum liability coverage. After that
you can pick and choose what type and how much insurance you want.
We'll begin with the liability insurance that Kathryn mentioned.
She's right. Liability insurance pays for injuries or damage that
you caused to someone else. You are responsible or liable to correct
the damage. Liability does not pay for your losses. Only others
hurt by your auto.
Liability comes with "limits" or maximum amounts that the insurance
company will pay. State required minimums are often not sufficient
to protect you financially if you're involved in a serious accident.
For any damages over the maximum covered you'll be on your own.
Remember that $10,000 doesn't go as far as it used to.
There are two types of liability insurance. "Bodily Injury"
covers pedestrians, your passengers and people in any other car
you hit. It will pay for claims against you and for your legal
defense up to the amount of your policy. You're not the only one
protected. It covers your car when you, your family members or
anyone else drives it with your permission.
If you're responsible for damaging other people's property you'll
need "Property Damage" coverage.
The damage could be to their car or anything else that they own.
Again, legal defense is also included. Your property is not covered.
Now to the heart of Kathryn's question. Liability doesn't cover
your loss in an accident. If you want help to pay for any loss
you suffer you'll need additional coverages.
"Collision" pays for repairs to your car when you're involved
in an auto accident regardless of who was at fault. After a deductible
is reached, your insurance company will be responsible for repairs
to your car.
"Comprehensive" is for damage to your car that's not caused
by an auto accident. Theft, fire, storm damage are common causes
of damage that are covered. Again, you'll receive payment once
a deductible amount is reached.
Suppose you're hit by someone who doesn't have enough or any
insurance. That's when "Uninsured or Underinsured Motorist" coverage
comes in. It pays you and others in your car if someone else is
at fault, but they don't have resources or sufficient insurance
to cover the loss. In effect, it's like you're buying extra insurance
for the 'other guy'.
How can you get the most for your auto
insurance dollar? First, by comparing quotes. You'll probably
be surprised at how much the prices vary for the exact same coverage.
Higher deductibles can lower your bill. If you can afford to
pay for an $800 repair to your car, you'll save quite a bit by
increasing your deductible from $500 to $1,000. Remember, that
you'd still pay the first $500 of an $800 accident. So the difference
isn't as large as it seems.
If you're driving an older car it might make sense to drop the
collision and comprehensive coverage. Your old car might be valuable
transportation to you, but the insurance company will only pay
you based on the car's "book value". If book value is $1,000 there's
very little sense buying insurance that will pay you $1,000 less
the deductible.
Check on low mileage and other discounts. Each insurance company
offers different discounts. Ask for a list of available discounts.
You may already qualify and merely need to apply.
Finally, a caution. An auto can do a lot of damage in a very
short period of time. To people and to property. So it's important
to have enough insurance to cover any situation that you might
get into. But it's also important to take the necessary steps
to avoid accidents. Make sure your car is well maintained. Don't
drive while impaired. Be cautious when you drive and anticipate
problems. After all, the best accident is the one that doesn't
happen. Get an auto insurance quote
and make sure you are covered!
Gary Foreman is a former purchasing manager who currently
edits The Dollar Stretcher Web site -http://www.stretcher.com.
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