It can be like trying to figure out advanced calculus when you're trying to read an auto insurance policy. If you know a few basic terms, it's really not that hard. The main terms you need to know are "collision," "comprehensive," "bodily injury liability," and "property injury liability."
You'll be glad you have Collision Coverage if your car hits another vehicle or property and needs to be fixed or replaced. The lower your premiums will be, the higher your deductible will need to be. Even if you were to blame for something, it would still be an accident because you probably didn't mean to hit that guard rail. How much would you be able to pay out of pocket for repairs? $250? $500? $1,000? Just like with health insurance, you'd have to pay that deductible amount first, and then the insurance company would pay for the rest of the repair costs.
Comprehensive Coverage is another term you should get to know well. This is the coverage that pays for damage caused by falling objects, fire, certain natural disasters, theft, and vandalism. Deductibles work the same way as collision coverage: the more you pay out of pocket, the less you pay for insurance.
You should also know how much Collision and Comprehensive coverage you have, as well as how much liability coverage you have. Let's say you hit the back of another car. Or your foot slips from the brake to the gas pedal and you run over a mailbox. Damages you caused with your insured vehicle will be paid for by your liability coverage. Your liability coverage will or could cover damage to people's bodies and property.
Body Injury Coverage is something you don't want to be without. If you caused an accident and the other people involved had to go to the hospital or missed work and lost money because of it, the costs would come out of your own pocket if you don't have Bodily Injury Coverage. Anyone can figure out how quickly these amounts can add up. This kind of insurance can also help you if the other person takes you to court. Body Injury Coverage is something that many states require you to have.
Coverage for damage to property is the other part of liability. Can you picture how much it would cost if you drove into the side of someone's house by accident? You wouldn't want to be without property damage insurance if you hit another car, a building, or anything else and had to pay to fix it. Property Damage coverage is similar to Bodily Injury coverage in that it helps protect you from a related lawsuit.
Each policy has its own limits and different levels of coverage. You should know the basics of what you are paying for and why it is important. No one plans on something going wrong, so be ready!
