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Bodily Injury
and Personal Property Liability
Two major components of an automobile
insurance policy involve liability coverage. These
areas insure the policyholder against injuries caused
to another person and to property. All 50 states
and the District of Columbia require minimum liability
coverage amounts. These requirements are typically
listed as a series of three numbers that define
how much, in thousands of dollars, the policy will
cover in the event of an accident.
For example, New Jersey requires
its drivers to carry minimum liability coverage
of 15/30/5. This means that the insurance company
will pay up to $30,000 for all people injured in
an accident, not exceeding $15,000 on any one person
and $5,000 for property damage.
However, many financial advisors
warn that state minimums nationwide do not
provide sufficient coverage in the event of a serious
car accident.
"We always recommend higher limits,
especially with today's expensive cars and hospital
prices" .
We suggest that drivers have liability
coverage that is no less than 100/300/50. That way,
you'll be able to provide $300,000 worth of injury
coverage to all passengers, $100,000 to one individual
and $50,000 for damage to property.
People with assets to lose in the
event of a lawsuit, such as a house or financial
portfolio, should consider a supplemental umbrella
insurance policy. Umbrella coverage protects you
in any kind of liability situation, whether the
accident is in your car or in your home. For $150
to $200 a year in premiums, you can shield yourself
with $1 million worth of protection.
If you have assets, it makes a lot
of sense.
2. Personal
Injury Protection (PIP)
PIP coverage pays for both medical
expenses and lost wages to the policyholder and
any passengers injured in the vehicle in the event
of an accident.
People with good medical and disability
policies might not need to maximize PIP coverage.
Instead, drivers with good health and disability
insurance only take on the lowest limit of PIP coverage
required by their state. Some states, such as New
Jersey, allow drivers to reject PIP as primary providers
and instead substitute their group health insurance
plan.
"Even if you have health insurance,
think twice before you reject or waive PIP coverage,"
he argues. "PIP usually provides dollar-one coverage
[with no deductible]. People with significant deductibles
and co-pays should have PIP."
3. Collision
and Comprehensive
These are two parts of a policy
that can add significant costs to your premium.
Collision provides coverage in the event of any
kind of accident, whether it's with another car
or an object, such as a utility pole or fire hydrant.
Comprehensive insurance covers you in the event
of theft or natural disaster.
If you have an older car, and the
cost of repairing or replacing your car is likely
more than its value, then experts such as Swan advise
waiving both collision and comprehensive coverage.
Keep in mind that any coverage you
decline on your policy, you'll need to have when
renting a car, from Avis or Hertz for example. So,
if you decline collision and comprehensive,
you should either accept a rental car company's
insurance or use a credit card that provides rental
car protection just in case.
For newer cars, you should have
a deductible on both collision and comprehensive
that is the maximum amount that you can afford to
pay out-of-pocket for repairs. The higher the deductible
the lower the premium. Insurance professionals say
that the average policy carries a $500 deductible
for both collision and comprehensive claims.
4. Uninsured
Motorist
As the name indicates, this coverage
provides you protection from crashes with motorists
not carrying car insurance, as well as covering
you in the event of a hit-and-run accident. Also,
uninsured motorist insurance coverage comes into
play when an at-fault driver doesn't have enough
liability coverage to pay for the damages from an
accident. Most states require drivers to carry uninsured
motorist coverage.
Ask for discounts
Now that you understand the basic
parts of a policy, you can save money on premiums
by asking your insurance company for a discount.
Discounts
available vary by state, but typically include:
safety equipment discounts (air bags, anti-lock
brakes and security systems), multi-policy discounts
(if you have other insurance coverage with the same
company or have several family members on the same
policy), good student discounts and premium reductions
for driver's education classes.
The experts recommend shopping around
with several insurance companies to get the best
premium rate, especially if you have a clean driving
record for the last three years. The longer that
you avoid an accident, the better the cost of the
insurance.
"Every day you drive, you're helping
to determine what your insurance cost is. "By driving
carefully, you're lowering your insurance payment."
Finally, car insurance premiums
will be higher for cars that are attractive to theft
and that suffer extensive damage during a crash.
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