What Do I Need in a Car Insurance Policy?
All states require automobile insurance or proof of financial responsibility in case you have an accident. Liability insurance is required in most states; no fault states require personal injury protection, and some states add uninsured motorist coverage. Some insurers want you to purchase rental reimbursement, towing and labor, accidental death, accident insurance, and even custom equipment insurance. This is not essential insurance. Deciding which coverage you need depends on your state law, your vehicle and you.
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Liability Insurance
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You need liability insurance that complies with your state law. Liability insurance covers the other driver and his car in case you have an accident in which you are at fault. Minimum limits vary with the state, and the states and the insurance industry express liability coverage with three numbers. Common required liability insurance is 30/60/20. Coverage is $30,000 for one person, $60,000 for an accident and $20,000 for property damage. This is the maximum coverage provided by this insurance policy. If you have assets, you need more coverage than the minimum required by law.
Personal Injury Protection
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Personal injury protection covers the driver and passengers of a vehicle, regardless of who caused the accident. This pays medical expenses, and some policies cover funeral expenses and death benefits. This insurance is broader than medical payments coverage, another form of medical coverage available for car insurance. You may not need medical payments coverage if you have health insurance, and you do not need it if you have personal injury protection.
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Comprehensive and Collision
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Comprehensive and collision insurance cover your car. The finance company requires this insurance if you finance the vehicle. Comprehensive covers windstorm, hail, theft, fire and falling objects or perils other than collisions. Collision covers your car's damage if you have an accident with another car or a stationary object. The two kinds of insurance together insure your car for physical damage. You do not need this insurance if you have paid for the car or if it is an older vehicle of low value. If the annual cost of comprehensive and collision insurance is more than 10 percent of the value of the vehicle, Consumer Reports suggests dropping comprehensive and collision coverage.
Uninsured Motorist
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Uninsured motorist coverage is in three basic forms: uninsured motorist personal injury, uninsured motorist property damage and underinsured motorist coverage. If you have an accident with an uninsured motorist, your uninsured motorist protection pays for your injuries and your vehicle if you have both uninsured motorist personal injury and property damage coverage. If the other driver has liability insurance in the minimum limits required by your state, and you have severe injuries, it may not be enough to cover your expenses. Underinsured motorist coverage pays after the other driver's insurance pays, up to the limits of your uninsured motorist coverage. Uninsured and underinsured motorist insurance is insurance for you and does not cover the other driver. Insurers often limit uninsured and underinsured coverage to the same amount as the liability insurance coverage you carry.
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References
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