Types of Auto Insurance Coverage

In most states, you'll have the options for six different components of auto insurance for your policy. Some overage options are not required and, since each component is priced separately, you can save money if you decide to waive (refuse) certain coverage.

Additionally, you should consider an umbrella policy beyond standard coverage.

Liability

1. Bodily Injury Insurance

Bodily Injury is generally required in all states as it covers injuries that you cause to someone else while you are driving (it also covers you if you are driving someone else's car--assuming that you were driving that car with their permission). In addition to medical bills (which can get quite pricey), Bodily Injury may cover fallout from a lawsuit--you should strongly consider increasing coverage here to protect your personal assets (like your home).

2. Property Damage

While Bodily Injury covers someone else's medical bills, Property Damage (aptly named) covers damage you cause to someone else's property (including their car, etc.).

Protection for your own health

3. Uninsured Driver Coverage

Uninsured Driver coverage protects you if you are hit by an uninsured (or underinsured) driver--in case that driver's coverage isn't large enough to cover all of your costs (or, if you don't know who that driver was--as in a hit-and-run).

4. Personal Injury Protection (often called "PIP")

PIP is generally NOT required by law and, if you have excellent health insurance coverage, you may consider waiving this coverage--you should check with your health insurance provider. PIP covers medical treatment for the driver and everyone in your car (often including lost pay if you can't work for a short period of time).

Protection for your car or truck

Collision and comprehensive insurance is not required by state law, as it covers your own property damage (though if you have a loan on your car, the loan terms may require that you have collision or comprehensive coverage). If you are comfortable taking a risk of losing your car due to collision, theft, etc (for example, if your car is not worth very much), then you may consider waiving either or both--which will save you money off of your premium.

5. Collision

Collision covers repairs to your car caused by an accident that is your fault (and, in some cases, damage caused by potholes), minus the deductible (the deductible is the amount you pay out of pocket for repairs while your insurance covers the rest). If you want to save money on your premium--you can raise your deductible).

If the accident is NOT your fault, then repairs should generally be covered by the other person's Property Damage insurance (though if you can't prove that they are at fault, YOUR collision insurance will cover this, as well).

6. Comprehensive

While Collision covers damage due to an accident, Comprehensive insurance covers damage in other situations (theft, vandalism, hitting an animal, flood, fire, falling trees, etc.) including damage to your windshield. Increasingly, insurance companies are starting to cover windshield repair or replacement without a deductible. For other repairs, though, you will be subject to a deductible--again, you can lower your coverage by increasing the deductible (the amount you are willing to pay out-of-pocket before your insurance covers the rest).

7. Miscellaneous

Insurance companies are starting to offer additional coverage to boost their revenue (like free towing, a rental car while your car is in the shop, etc.) Our opinion is that you can generally pass on these--take a minute to think how you'd get to work in case you lose your car for a week, or whether you have AAA or another service that already offers towing coverage.

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