As an automobile owner and driver, most states require you to purchase car insurance. When buying a car insurance policy you are purchasing a package of coverage based on a variety of factors, including what kind of car you drive and the amount of protection you are interested in. While the law only requires minimum protection, it may be in your best interest to purchase more coverage than required. This may help protect you from a lawsuit or hefty repair bills.
To understand an auto insurance policy, it is beneficial to learn the various types of coverage that can be provided for you. Listed below is a breakdown of each type of insurance coverage.
Liability Insurance
Liability coverage is the foundation of any auto insurance policy, and is required in most states. If you are at fault in an accident, your liability insurance will pay for the bodily injury and property damage expenses caused to others in the accident, including your legal bills. Bodily-injury coverage pays for medical bills and lost wages. Property- damage coverage pays for the repair or replacement of property that may have been damaged aside from your own car. The other party may also decide to sue you to collect “pain and suffering” damages.
Liability coverage limits (the damage you do to others) is usually presented as a series of three numbers. For example, your agent might say that your policy carries liability limits of 100/300/50. That stands for $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident, and $50,000 in property- damage coverage per accident.
Liability insurance is the groundwork of your auto insurance puzzle. Your insurance minimum will depend on where you live. For example, in Ohio, drivers must purchase at least $12,500 in bodily injury coverage per person, $25,000 in bodily injury coverage per accident, and $7,500 in property damage coverage (also indicated as 12.5/25/7.5).
It is important to remember that if you cause a serious accident, minimum insurance may not cover you adequately. For this reason, it is a good idea to buy more coverage than what your state requires. If you are a homeowner or have a savings account, retirement fund or other nest egg, you should consider more than the minimum amount of liability insurance. In most states, drivers who are injured are allowed to sue the driver who is at fault in a car accident. If you are sued and your liability insurance does not pay for all of the damages, you are still accountable and your personal finances will be at stake to compensate for the remainder of the damages.