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Your Auto Insurance Options: Explained


Published February 18, 2019

Shopping for car insurance can be a daunting task. How do you know what type of insurance you need? What is required by your state? What is required by your lender? Are there ways to save money and still have the right amount of coverage? Listed below are the five types of car insurance coverages available. We have also provided a few scenarios that describe situations in which you might benefit from having additional, non-required coverage added to your policy. Depending on your vehicle and budget, there are some money-saving tips to consider as well.

1. Liability Insurance
Liability insurance covers you in the event of a car accident when it is determined that the accident is a result of your actions. Liability insurance will cover the cost of repairing any property damage caused by the accident as well as the medical bills from any resulting injuries. Most states have a minimum requirement for the amount of liability insurance coverage that drivers must have. In Michigan, the minimum liability limits are a bodily injury at $20,000 per person, up to $40,000 total per accident, and a $10,000 minimum for property damage. Only nine other states allow lower limits of liability.

So if you can afford it, itís usually a good investment to have liability insurance that is above the state's minimum liability coverage requirement, as it will provide extra protection in the event you are found at fault for an accident and you are responsible for any claims that exceed your coverage's upper limit. You wouldn't want to run the risk of having to pay a large amount of money out-of-pocket because your policy limit has been exceeded. (Additionally, this is why it is important to also familiarize yourself with your policy).

2. Collision Coverage
If there is an accident, collision coverage will pay for the repairs to your car. If your car is totaled, the insurance company will make a decision to repair it or not, and usually, this decision is contingent upon whether the cost to repair your vehicle exceeds its value. If they do agree to repair the vehicle, collision coverage will pay the value of your car based on year, mileage and condition.

If your car is older, it may not be worth carrying collision coverage on, depending on the value. On the other hand, if you have a more expensive car or one that is relatively new, collision insurance can help get you back to where you were before any damage to your car. If you have a lien holder, like a bank, credit union, collision coverage is required.

3. Comprehensive Coverage
What if something happens to your car that is unrelated to a covered accident, like weather-related damage or if your car is stolen? Will your insurance company cover the loss? Liability insurance and collision coverage cover accidents, but not these situations. These circumstances are insured by comprehensive coverage.

Comprehensive coverage is a great investment if you can afford it. While anti-theft and tracking devices on cars can make this coverage slightly more affordable, carrying this type of insurance can be costly and may not be necessary, especially if your car is easily replaceable. Because it covers so many unforeseeable outliers, it is a nice option to consider if you have the means. If your vehicle is financed, comprehensive coverage is required.

4. Personal Injury Protection
While comprehensive coverage may not be necessary to include in your policy, Personal Injury Protection (PIP) is something you should strongly consider. The costs associated from an accident can quickly add up, and in order to cover those costs, Personal Injury Protection is available. In Michigan, insurance carriers are responsible for paying medical coverage up to $500,000. Be aware that Michigan auto insurance policies have four different levels of PIP available. Itís best to discuss with your insurance company which one is right for you.

5. Uninsured /Underinsured Motorist Protection
While state laws mandate that all drivers should be insured, this is unfortunately not always the case. Another issue that can arise is that while a driver may have liability insurance, many states have relatively low minimum coverage requirements that may not be enough to cover all of the expenses of an accident. So, if someone is legally responsible for damages related to an accident, you won't receive any payment if they do not have coverage or you will receive less than you need to cover the cost of damages if your damages exceed their coverage amount.

Additional Tips:
It's usually relatively inexpensive to add uninsured/underinsured motorist protection to your car insurance policy, especially considering the amount of protection it offers.

Rental car coverage for when your vehicle is in the body shop for collision repair is relatively inexpensive. Make sure you take enough coverage so that youíre able to rent a vehicle comparable to the one you drive.

When you finance your car, ask about GAP insurance. Itís commonly offered on lease vehicle but can be purchased for financed vehicles as well. Should your vehicle be totaled, and its value is less than what you owe on it, GAP insurance will cover the difference.

We offer the information above only as a courtesy to our customer. Please consult with your insurance company or licensed insurance agent before making any changes to your policy.
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