Automobile Insurance

Facts about car insurance and what it covers.

State laws require car owners to purchase minimum amounts of liability insurance to cover bodily injury and property damage caused by you or someone authorized by you to drive your car.

Despite what state laws say, the unfortunate fact of the matter is that many drivers simply neglect or refuse to purchase the required insurance coverage. And if they purchase the minimum coverage required by law, it may not be enough to pay for damages caused in a serious accident. As a result, in addition to liability insurance, you should also consider buying uninsured or underinsured motorist's coverage. In the event that you are involved in an accident with an uninsured motorist, or one whose coverage is inadequate, your company will provide payment for any injury or damages you suffer as a result of their negligence.

NO-FAULT INSURANCE

More than half the states have enacted laws providing for so-called "no-fault" automobile insurance. While the details of these laws vary from state to state, no-fault statutes generally allow a driver who is injured or who suffers property damage in an auto- mobile accident to collect payment from his own insurance company, up to a specified limit, regardless of who caused the accident. Under no-fault coverage, the driver himself may have been responsible for the accident, but is still entitled to receive payment up to the limits of no-fault coverage.

If the damages suffered by a driver who wasn't at fault exceed the limits of no-fault coverage, he can then file a claim against the negligent driver to recover the additional amount. The negligent driver's insurer would then either pay the claim, attempt to settle for a reduced amount, or defend its customer in the event of a lawsuit.

COLLISION AND COMPREHENSIVE

In addition to liability insurance coverage, you may also consider purchasing collision insurance. This coverage pays for damage for your car up to the automobile's cash value. For example, if you drive a car which is five years old and are involved in an accident, your insurance will pay only the "book value" of the car, or the repair cost, whichever is lower.

Comprehensive insurance coverage protects your automobile against theft, fire, flood, and glass breakage. However, comprehensive insurance coverage does not extend to collision damage, engine problems or other mechanical difficulties, or normal wear and tear to the vehicle.

While both collision and comprehensive coverage may be valuable during the early years of car ownership (and are usually required by the lender who provides your car loan), the rapid depreciation of most automobiles may make these coverages less valuable as time goes on. If your car is paid for and more than five years old, you may want to consider dropping these coverages from your insurance policy.

If you do have collision and comprehensive coverage, check to be sure that the policy doesn't require you to accept so-called "after market" parts manufactured by companies other than the one that built your car. In many cases, these parts are nowhere near as durable or sturdy as those made by the car's manufacturer, but insurance companies want you to use them because they are usually much cheaper. Some insurance companies have tried to force consumers to pay the difference if they refused to accept OEM (original equipment manufacturer) parts. Unless your policy specifically requires you to accept the cheaper replacements, don't let yourself be talked into it by a claims adjuster or your insurance salesperson.