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Know Your Coverage Types

What is your car insurance actually insuring? Although you're buying a single insurance policy covering a specific vehicle, a number of components make up the final cost:

  • Bodily injury liability: Covers injury and death claims against you, and legal costs, if your car injures or kills someone.
  • Property damage liability: Covers claims for property that your car damages in an accident. Because liability coverage protects the other party, it is required in all but three states.
  • Medical payments: Pays for injuries to yourself and to occupants of your car. This is optional in some states. In "no-fault" states, personal injury protection replaces medical payments as part of the basic coverage.
  • Uninsured motorist protection: Covers injuries caused to you or the occupants of your car by uninsured or hit-and-run drivers. "Under-insured" coverage also is available, to cover claims you may make against a driver who has inadequate insurance. In some states, as many as 30 percent of drivers are uninsured.
  • Collision coverage: Covers damage to your car up to its book value. Collision coverage carries a deductible, which is the amount per claim you have to pay before the insurance takes effect. The lower the deductible, the higher the premium. While it is legally optional, a lending institution or leasing company usually requires collision coverage.
  • Comprehensive (physical damage): Covers damage to your car from theft, vandalism, fire, wind, flood, and other non-accident causes. Comprehensive also carries a deductible.
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