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A: Auto insurance policies can be very confusing. Insurance companies sell many differet types of auto insurance, some required and others optional. When you review your auto insurance policy, you are likely to see these categories of auto insurance:
Bodily Injury - This form of auto insurance covers you from legal claims made by other people for their injuries if you caused an accident. You usually purchase the policy based on liability limits - the amount of money you would pay if you caused injury. Many states require a minimum level of bodily injury insurance.
Liability - Sometimes included with the Bodily Injury aspect of your policy, it covers damage to property that you cause.
Collision - Collision insurance covers damage to your vehicle caused by collision with another vehicle or object. Usually the insurance company of the person that caused the accident pays for the repairs (and the person at-fault pays their deductible)
Comprehensive - Comprehensive insurance covers damage to your vehicle from other sources such as fire, theft, vandalism, hitting a moose, etc. Make sure you understand what is and isn't covered by your policy - it can vary quite a great deal. This type of auto insurance is often removed for older vehicles since they aren't worth that much any more.
Uninsured or Underinsured Motorist Coverage - Despite many laws to ensure that everyone has auto insurance, unfortunately not everyone does (and these drivers usually cause more than their fair share of accidents). If you are in an an accident caused by an uninsured motorist, you are out of luck (and must pay for your repairs) unless you have uninsured motorist coverage.
Personal Injury Protection (PIP) and/or Medical Coverage - This coverage is not available in all states - it is primarily available in no-fault states. PIP
pays for certain expenses for the insured person and passengers. The types of expenses vary by state. Some examples of expenses include: medical and hospital expenses, salary and funeral expenses for bodily injury caused by a covered accident, regardless of who was at fault. You may not need this insurance if you and all you passengers have their own medical coverage.
Other features:
- Towing: This coverage pays for towing of your car if your car breaks down. If you have AAA, you probably don't need this feature.
- Glass: Some states require no-deductible replacement of any glass breakage. In other states, insurance companies may provide this as an extra feature.
- Car Rental: Many insurance companies will offer you a rental car if your car is being repaired. Usually you pay extra for this and may not be a good idea if you have multiple cars and don't always use them all.
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