Are you
protected from a lawsuit or high repair bills if you were in
an accident? Minnesota
requires you to purchase a minimum amounts of certain kinds of
coverage, but how well does that actually protect you? Your
auto insurance policy is a package of different coverages which
include:
Liability insurance
Liability coverage is the foundation of any auto insurance policy.
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.
The states minimum insurance limit may not cover you
adequately. That's why it's a good idea to buy more than what
your state requires. If you own a home and have a nest egg and
a savings account, you should consider more liability insurance
because, in most states, drivers are allowed to sue other drivers
who injure them in car accidents. If you're sued and your liability
insurance doesn't pay for all of the damages, your personal finances
are on the hook, and it's likely you'll become a target.
Collision coverage
If you cause an accident, collision coverage will pay to repair
your vehicle. You usually can't collect any more than the actual
cash value of your car, which is not the same as the car's
replacement cost. Collision coverage is normally the most
expensive component
of auto insurance. By choosing a higher deductible, say $500
or $1,000, you can keep your premium costs down. However, keep
in mind that you must pay the amount of your deductible before
the insurance company kicks in any money after an accident.
Insurance companies often will "total" your car if
the repair costs exceed a certain percentage of the car's worth.
The critical damage point varies from company to company, from
55 percent to 90 percent.
Comprehensive coverage
Comprehensive coverage will pay for damages to your car that
weren't caused by an auto accident: Damages from theft, fire,
vandalism, natural disasters, or hitting a deer all qualify.
Comprehensive coverage also comes with a deductible and your
insurer will only pay as much as the car was worth at the time
of the claim.
Personal injury protection (PIP)
Personal injury protection (PIP) and broader "no-fault" coverages
are expanded forms of medical payments protection that are
required in Minnesota. Minnesota PIP includes payments for lost
wages and essential services (such as house keeper or child care).
Uninsured/Underinsured motorists coverages
Uninsured motorists (UM) coverage pays for any bodily injury
settlements you would obtain if you're struck by a hit-and-run
driver or someone who doesn't have
auto insurance.
Underinsured motorists (UIM) coverage will pay out if the driver
who hits you causes more bodily injury liability damage than
his or her liability coverage can cover on your damaged vehicle.
Supplemental coverages
Several supplemental auto coverages are available:
Rental reimbursement, covers vehicle rentals
required because your car is damaged or stolen.
Coverage for towing and labor charges in case of a road breakdown
is also common.
Gap coverage for your new car will pay the difference between
the actual cash value you receive for the car and the amount
left on your car loan if your vehicle is totaled in an accident.
|
In basic terms:
Liability coverage, if you are at fault, pays for the
bodily injury you become liable for to someone in the accident.
Collision coverage, pays to repair your vehicle from
damage caused by collision with another vehicle or stationary
object.
Comprehensive coverage, pays for damage to your car
by other means (such as fire, flood, hail, etc.).
PIP coverage pays for medical bills and lost
wages.
Property-damage liability coverage pays for the repair
or replacement of things you damage other than your own car.
The
other party
may also decide to sue you to collect "pain and suffering" damages. |
Reading your policy
Liability coverage limits are usually presented as a series
of three numbers. For example, your policy says your liability
limits
are 30/60/10. That stands for $30,000 in bodily injury coverage
per person, $60,000 in bodily injury coverage per accident, and
$10,000 in property-damage coverage per accident. |
