Here are some general guidelines to help you understand the different types of auto insurance coverage.
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- Collision Coverage
- Comprehensive Coverage
- Bodily Injury Liability
- Property Damage Liability
- Uninsured Motorists Coverage
- Underinsured Motorists Coverage
- Medical Payments Coverage
- Other Recommended Coverages
Collision coverage pays for physical damage to your car resulting from a collision with an object, such as another car or a tree. The newer and more expensive your car, the more reason there is to purchase this insurance, since repairing or replacing a damaged car can represent a major expense. Typically, collision coverage is optional, but it may be required by some lending institutions.
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Comprehensive Coverage pays for most other damage to your car, including fire, severe weather and theft. Although this insurance is also optional, it's desirable because it protects you from expenses due to damage caused by unpredictable events. Comprehensive is generally less expensive than collision coverage.
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Bodily Injury Liability protects you from financial loss (up to your policy limits) if your automobile injures pedestrians, passengers in your car, or someone in another car involved in an accident. In most states, you're required to buy minimum amounts of bodily injury liability coverage.
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Property Damage Liability Insurance pays for any damage you cause to the property of others, whether that involves another car or other property, such as a fence or mailbox. This coverage also is mandatory in many states.
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Uninsured Motorists Coverage pays you benefits for injury or death caused by a hit-and-run driver or a driver with no insurance (whether you're a driver or a pedestrian).
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Underinsured Motorists Coverage pays benefits for injury or death caused by a driver who doesn't have enough liability insurance to cover the losses.
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Unlike Bodily Injury Liability Coverage, Medical Payments Coverage takes care of medical expenses for you (as a pedestrian or as a driver) and/or passengers in your car. This insurance is required in some states, and payment is made regardless of who is at fault. This is commonly called "no-fault" insurance -- which doesn't mean that you can't be held responsible for an accident. Rather, it simply allows you to be compensated by your provider to the limits of your coverage, no matter who is at fault. In addition to covering your doctor and hospital bills, this insurance may also cover you for lost wages, funeral expenses and other essential costs.
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Other recommended coverages Include rental reimbursement coverage and towing and labor coverage. These are inexpensive and can be useful in the event of an accident or breakdown.
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NOTE: One way to lower your insurance costs is to ask for higher deductibles (the amount of money you agree to pay before you make a claim on comprehensive or collision). By requesting higher deductibles, you can significantly lower your final premium.
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