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Auto Insurance Policy Coverage Definitions

Auto insurance coverage is an expense most of us are accustomed to paying, since some form of car coverage is mandated virtually everywhere across the country. We may complain about our premiums, but in the end most of us do buckle down and pay them every six months or whenever they come due. But as much as we like bickering about the cost of our policies, most of us who are not insurance industry insiders really don't have a very well developed concept of what each of the parts of a policy do, or why we need them. In most cases we simply go with the advice of an agent and sign on for whatever policy they recommend.

But this is hardly the way we should act when spending our hard earned money this way. Auto insurance can be very expensive. There's no telling how much money individuals all over the country waste every years simply by taking their policies for granted and renewing year after year without ever asking exactly what each portion of the policy does or why it is included in their plan. Taking a closer look at all of the major areas of coverage and studying a brief definition of each of them can give us a more solid basis as consumers to look at our own policies and decide whether we really need all that coverage.

Auto Liability Coverage is Required

Required by state law in almost every state across the country, liability coverage is the center of every policy. If you own a very old vehicle or one that is not worth much money, there is no sense in insuring it against damage. But you still need to be protected from the cost of repairing someone else's car or their injuries in the event of a serious at fault accident. Liability insurance focuses exclusively on the costs of the other driver and passengers' injuries and property damage, with no coverage for the insured vehicle or driver.

Collision Coverage Enhances Insurance Value

Auto collision insurance picks up where liability leaves off. If you get into an accident and are at fault, your insurance will be required to pay for the other car's injury and property damage, as discussed above. This is the job of the liability portion of your policy. If you also carry collision insurance, it will take care of the damage to your own car or truck. There are limits to collision insurance, as there are to all parts of a car insurance policy. The collision coverage you pay for is limited to the market value of the car at the time of the claim. Therefore, the usefulness of this coverage goes down as your vehicle depreciates over time. There will come a time when it is no longer worth paying for. Keep an eye on this part of your policy as well as the blue book value of your car as the years go by. Make sure you are not paying for auto insurance you don't need.

Comprehensive Auto Insurance Versatile Protection

Comprehensive auto insurance is similar to collision coverage in that it covers your vehicle from damage and not any other. The way it differs from collision is that comprehensive only applies in non collision instances. For example, break ins are covered by comprehensive. It should be noted that an important exclusion of this auto insurance is in property protection. If your car is broken into, the damage to the car will be covered, but not the value of any personal items in most cases, unless you have specific endorsements covering personal property. Like collision, comprehensive auto insurance loses its value over time.

Uninsured and Underinsured Motorist Coverage

In some states, all drivers are required to carry some form of uninsured and underinsured motorist coverage, although this part of your auto insurance policy is optional elsewhere. Nonetheless, regardless of the law in your state this area of protection is important because it protects you in situations where the other driver in an accident you are involved in has serious insurance issues or when you are the victim of a hit and run, which is treated by insurers as an uninsured motorist case. Uninsured and underinsured protection seems unfair to some drivers because it feels like as the law abiding citizen, you are paying for the ones flouting the law. Yet they do protect you from bigger bills you might otherwise face.

There are other areas available in auto insurance policies, and it is important for drivers to be well versed in the options they have so that they can put together auto insurance plans that make sense to them. Get a handle on auto insurance policy coverage definitions and design a plan that works for you.


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