Auto > Basics
A typical auto insurance policy has a number of different coverage options to it. Most states will have a minimum requirement for different types of coverage, though you may want to consider purchasing more than the minimum to protect yourself from lawsuits or high repair bills.
The main aspect of any car insurance policy is liability coverage; required in most states. Liability coverage encompasses bodily injury coverage and property damage coverage. Bodily injury coverage will pay for medical bills and lost wages. Property damage coverage will pay for repairing or replacing damaged property other than your own car.
The minimum liability coverage you must have in any state is shown as a ratio of three numbers: 20/40/15 is the minimum in Texas ($20,000 of bodily injury coverage per person, $40,000 of bodily injury coverage per accident, and $15,000 of property damage coverage).
You can take a look at the minimum levels of coverage required for your state. It is important to not that these minimum levels are really just that, minimums. If you cause a serious accident, these minimums will rarely be enough to cover all the damage and your personal savings will be at risk to pay for the rest of it. In most states, you can be sued by other drivers for injury caused in an accident, and if your liability insurance isn't enough to cover it, you will be held personally responsible for the rest.
After you've taken care of anyone affected by an accident you've caused, you need to look at repairing or replacing your vehicle. This can be done by the insurance company with collision coverage. You insurance company will not pay any more than the actual cash value of your car, which is most likely much lower than how much it would cost for you to replace it.
Collision coverage is typically the most expensive part of your insurance. By paying a higher deductible when you get into an accident, you can keep your premiums lower. But keep in mind that the deductible will need to be paid in full before your insurance company will contribute any money.
You car may be "totaled" if repairing it would cost more than a certain percentage of what the car is worth. This point varies between companies, anywhere from 55% to 90%.
Comprehensive coverage pays for any damages to your car that weren't caused during an accident. Theft, fire, vandalism, and natural disaster damage are all covered. This coverage will also have a deductible, and again, your company will only pay as much as your car was worth when damaged.
It's a good idea to have an estimate of what your car is worth so that you're not paying more for coverage than what you would get back if the car was damaged. You can check Kelley Blue Book or National Automobile Dealers Association.
Medical payments, PIP, and no-fault coverages
If you and your passengers are injured during an accident, your medical payments (MedPay) coverage will pay for the medical expenses. This coverage will be in place regardless of who's at fault. It will even cover you if you're injured as a pedestrian.
There are also expanded forms of medical payments protection that may be required in your state. They include personal injury protection, and "no-fault" coverage. These forms of coverage include features like payments for lost wages and child care.
If your health insurance plan is good, you may not need any of these extra MedPay features.
Uninsured/Underinsured motorists coverage
If you are in an accident cause by a hit-and-run driver or someone with no insurance, uninsured motorists coverage will pay for your injuries. If the person causing the accident has insurance but not enough to cover your damages, underinsured motorists coverage will help you.
Having the minimum amount of these coverages is recommended, so that you'll have some coverage if you can't find the other driver, or they don't have enough coverage.
You can add a number of features to make your coverage more complete.
A rental reimbursement is recommended if your car is damaged or stolen and you need to rent a vehicle.
There are options for towing and labor coverage in case of a breakdown.
Gap coverage will cover the difference between the cash value you get for your car and the amount left on the car loan if you're still paying on off.