Understanding your car insurance policy doesn't mean learning a strange new language. To receive the best possible coverage for you, you must understand the different types of coverage. You don't have to be satisfied with a quick overview by your auto insurer. Now you can truly assess the quality of your coverage by knowing the meanings behind the terminology.
~Liability
Most people are familiar with liability insurance. When insurance coverage is required by law, liability is normally the least amount you can have. But what exactly is liability coverage?
Bodily Injury Liability, or BI, covers any injuries or deaths you are responsible for. In addition to injuries, BI also provides for legal defense in the event a lawsuit is filed against you. The two coverage figures you see are the maximum amounts that will be paid per person, per incident.
Property Damage Liability, or PD, covers the damages to another's property in an accident. Normally, this would be the other person's vehicle, but any property you damage in the accident will be covered as well.
~Comprehensive
Comprehensive coverage, or COMP, covers incidents not caused by collisions. This will usually only cover your own car. Examples include damages due to fire, flood, animals, and the common cracked or broken windshield. If your car is stolen, comprehensive coverage will pay for any damages that occur.
Comprehensive coverage is usually only required if your car is financed or leased.
~Collision
Collision coverage, or COLL, pays for damages to your car in the event of a collision. Collision coverage is only required for financed or leased vehicles in most cases. However, having collision coverage with a high deductible may save you money, especially if you own a newer vehicle.
~Uninsured and Underinsured
The following policies cover the policy holder, other drivers of the vehicle, and passengers in the event another motorist is uninsured or underinsured. The coverage is listed as a dual amount which covers per person, per incident. Be aware that if your coverage is insufficient as well, you may pay for damages out of pocket.
- Uninsured Motorist Bodily Injury (UM)
- Underinsured Motorist Bodily Injury (UNDUM)
- Uninsured Property Damage (UMPD)
- Underinsured Motorist Property Damage (UNDPD)
~Additional Coverage
There are various types of additional auto coverage you can receive. These can help cover hospital expenses, work loss, parts and labor, loans, custom parts, towing, and rental cars. Carefully read over each type of coverage to determine if any are right for you. Normally, motorists add on coverage for towing or road-side assistance in the event your car breaks down.
To truly assess your coverage, understand the terminology and your needs. Being underinsured is almost as bad as being uninsured. Choose reasonable deductibles. Higher deductibles equal lower premiums, but more out of pocket expense. Don't be afraid to ask your insurer any questions you may have. Unless you're comfortable with your policy, don't buy. Quality coverage is priceless when an accident occurs and you should be happy with your current car insurance policy.