Auto insurance contracts contain a lot of information and legalese that you may find difficult to interpret. While it’s important to understand everything in a contract before signing it, some aspects matter more than others.
When you look at your next insurance contract, pay particular attention to these five items. They’ll improve your protection and help you save money.
1. A Deductible That Matches Your Budget
Your deductible is the amount of money that you must spend on repairs before your insurance company starts picking up the tab. For instance, if your insurance policy has a $500 deductible, then you will need to spend $500 on repairs before the insurance company pays for the rest of the work and parts.
Deductibles have a significant effect on how much your auto insurance costs. Choosing a low deductible usually means that you will pay more for your monthly premiums. High deductibles will lower the price of your policy.
Choosing the highest deductible might sound like the right option to take since it will lower the monthly cost of your insurance. Keep in mind, though, that you will have to pay the deductible out of your pocket. Can you afford to spend $2,000 after a collision? If not, then you probably shouldn’t choose a $2,000 deductible for your contract.
Ideally, you can choose an affordable deductible that makes your insurance easy to buy. Most insurance companies will give you multiple quotes, so you can see how shifting the deductible affects the policy’s price.
2. A Level of Coverage That Makes Sense for You and Your Vehicle
Nearly all states set minimums for car insurance coverage. A reputable insurance company won’t even try to sell you a policy that doesn’t meet your state’s minimum requirements.
You have the option to purchase higher levels of protection, though. In Hawaii, for instance, you need at least $10,000 in personal injury protection - but you can choose a higher level of insurance if you want. You can also add protection to your basic policy. For instance, you might add comprehensive coverage to protect your vehicle from damage that isn’t caused by a collision. If your car is damaged by hail, for example, comprehensive insurance would cover the cost of repairing your car.
The more coverage that you get from an insurance contract, the more the policy will cost. Keep that in mind as you browse insurance options.
If you have a new car, then it might makes sense to purchase comprehensive coverage. If you have an older car that isn’t worth much, then you may not need comprehensive coverage.
Instead of choosing as much coverage as you can afford, look for a policy with the protections that you need.
3. Personal Injury Protection
After a collision, you and your passengers may face significant medical fees. Just visiting the emergency room could cost many thousands of dollars. Personal injury protection is the best way to protect yourself and passengers from the high costs of medical treatments.
Some states, but not all, require you to carry personal injury protection. Most states require about $10,000 in personal injury protection, but there are outliers like New York, which requires $50,000.
Even if your state doesn’t require you to carry personal injury protection, you should consider adding it to your policy. It will make your coverage a little more expensive, but may save you a lot of money in the long run.
After a bad collision, you’ll want as much personal injury protection as you can afford.
4. Bodily Injury Liability
Bodily injury liability pays for the medical treatments of people in the other car. After a collision, people hurt in the accident can sue for damages. If someone breaks a leg, gets severe whiplash, or suffers some other injury, then you may be responsible for the costs of their medical treatments.
Bodily injury liability covers these damages. Most states require bodily injury liability because they want to make sure victims can get the medical attention they need. Still, the required minimums vary quite a bit. In California, you only need $15,000 in bodily injury liability. In Alaska, you need $50,000 of coverage.
5. Uninsured and Under-insured Motorist Protection
When someone else causes a collision, you expect that person’s insurance company to pay for your repairs and medical bills. Unfortunately, not all drivers carry insurance. Even drivers with insurance may not have enough coverage to pay for your repairs and healthcare.
That’s why you need insurance that protects you from uninsured and under-insured motorists.
About half of the states require uninsured/under-insured motorist coverage. Even if your state doesn’t require it, you should consider adding it to your policy. Insurance companies usually only charge a small amount for the coverage. Considering how much protection you get from it, this kind of coverage can be quite a deal. It could save you from spending tens of thousands of dollars out of pocket.
Other than state requirements, you get to decide what level of auto insurance you buy. As long as you can find these five items in your insurance contract, you probably have an arrangement that will protect you from liability and significant financial loss.