Components of a Basic Auto Policy

If you plan to drive a car, ensure you understand everything about car insurance. Driving a car is a necessity these days for most people.

Accidents occur everyday and even a minor accident can easily cost you thousands of dollars. Auto insurance provides coverage against physical damage and bodily injuries sustained due to an accident. If you are new to auto insurance, it may seem complicated, but as a matter of fact, the basics of auto insurance are very simple and easy to understand.

Here are six basic coverage that are included in your auto insurance policy:

1. Bodily Injury Liability: This coverage covers the bodily injuries caused to others in an accident due to your (or someone else driving your car) negligence or mistake. The coverage also covers you and your family members if listed on the policy. The minimum bodily injury coverage to be bought by a driver is laid down by State laws; however, it is recommended that you buy more than the minimum amount required by the State, because most of the time, the minimum liability amount is not enough to cover all the damages.

2. Property Damage Liability: This coverage compensates for the damage caused to a property due to an accident. It can include damage suffered by the vehicle of the other driver involved in the accident or other properties such as street lamps, telephone poles, fences and more.

3. Personal Injury Protection (PIP) or Medical Payments: This coverage type covers the medical expenses incurred during the treatment of injuries suffered by you and your passengers during an accident. Other than medical bills, PIP also covers lost wages, funeral cost and provides compensation in case of permanent loss of bodily function or disfigurement.

4. Uninsured and Underinsured Motorist Coverage: This coverage provides coverage for physical injury suffered by the insured and vehicle damages in case the driver responsible for the accident does not possess liability coverage (uninsured) or if his coverage is not enough to pay for the compensation (underinsured). It also pays for damages suffered as a result of a hit and run.

5. Comprehensive Coverage: This coverage compensates you for damages caused by factors other than an accident or collision. These factors include theft, natural disasters, explosions, contact with birds and animals or vandalism.

6. Collision Coverage: This particular coverage pays for the damage suffered by your car due to a collision with another car or stationary object. It also compensates for damages caused due to flipping over and potholes. This coverage will pay the cost to repair your car (minus the any deductible), even if you are at fault for causing the accident. If the accident is not due to your fault, your insurance provider may try to recover the amount paid to you by the insurance company of the other person who is at fault. If it succeeds in doing so, your deductible may also be returned.

If you are paying a car loan, it becomes mandatory to purchase collision coverage along with the comprehensive one. This helps car dealerships and lien holders, because if your vehicle is totaled during an accident, the car loan may be paid off using the insurance money.

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