Auto Insurance Coverage Options

    Published: 06-16-2009
    Views: 11,253
    Wells Fargo financial expert Emma Gutierrez discusses the options you have for auto insurance coverage to make sure your vehicle is protected.

    Emma Gutierrez: Hello, I am Emma Gutierrez with Wells Fargo and Company. Today, we are learning about the many types of auto insurance coverage that are available, to help you understand which ones are most important.

    Although, most states require car owners to buy a minimum amount of insurance before they can legally drive a car, the requirements vary from state to state and often don't provide the recommended amount of protection. The most common coverage options include liability, collision and comprehensive coverage.

    Liability coverage is the foundation of any auto insurance policy and is required in most states. Liability insurance pays for bodily injuries and property damage that you, the insured driver or policyholder, cause to someone else or someone else's property. It's very important to have enough liability insurance, because if you are involved in a serious accident, you maybe sued for a large sum of money.

    Insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person, $300,000 per accident and $100,000 in Property damage protection per accident. On the other hand, collision & comprehensive coverage pay for damages to your car as oppose to someone else's, minus your deductible.

    Collision coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over minus your deductible. Comprehensive coverage reimburses you for losses due to anything other than collision, such as fire, theft, flood, or vandalism.

    Other important types of coverage include medical payment or personal injury protection (PIP), uninsured and underinsured motorist, and rental reimbursement coverage.

    Medical payment coverage or PIP pays for the treatment of injuries to the driver and passengers of the policyholder's car. This can cover medical payments, lost wages and the cost replacing services normally performed by someone injured in an auto accident.

    Uninsured and underinsured motorist coverage will reimburse you, a member of your family or the insured driver if one of you is hit by an insured, underinsured or hit and run driver. This also protects you, if you are hit as a pedestrian and finally, rental car reimbursement coverage, an inexpensive, but often overlooked option reimburses you for the cost of renting another car while yours is being repaired.

    So how much coverage do you need? In most states, the minimum liability coverage required by law, isn't enough to cover the potential total losses you may face. So you should consider higher limits that provide the recommended amount of protection.

    And when choosing a deductible, you should consider how much you are willing to pay out of pocket for any damages to your vehicle. Usually the higher your deductible the lower your premium.