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A collision between an SUV and a car in New York in August 2002. Insurance specialists advise people to seek adequate collision coverage, which pays for damage to the policyholder's car that results from impact with anything, even if one is at fault in the collision. (G. Paul Burnett/The New York Times) |
Making your car insurance policy work
While most of us may cringe a little when we write our monthly check for car insurance, the peace of mind and protection it buys is priceless.
In the event of an accident or the theft of your vehicle, insurance not only provides you (and your loved ones) with medical coverage but also - if used correctly - prevents dire financial losses.
A basic auto policy generally offers coverage in six categories, according to the Insurance Information Institute (www.iii.org), which is based in New York City.
"It's our job to explain insurance to people, what it is and how it works," says institute vice president Carolyn Gorman. The Insurance Information Institute also interprets and explains any changes in insurance laws.
Its website, a great source of guidance, reflects information gathered from the 50 states:
"In many states, PIP can cover medical payments, lost wages and even funeral costs," says Gorman. PIP can also pay to replace services that had been performed by the injured person (a homemaker, for example).
" 'Comprehensive' basically covers everything else," Gorman says. "This is the only time your insurance policy covers you for flooding - ever."
For someone with a relatively new car, it's especially important, she explains. Theft, collision with birds or deer, a windstorm, hail, vandalism, or even a riot could set you back thousands of dollars by totaling your car.
"You might be interested to know it covers you for earthquakes," Gorman says. "Comprehensive insurance is usually sold with a $100 to $300 deductible; a higher deductible will lower your premium."
If a state does not require a driver to purchase collision or comprehensive coverage, you must gauge whether paying for protection is better than replacing your car out-of-pocket. For those with a car loan, the lender will probably make this coverage mandatory.
Motorists often ask the Insurance Information Institute if they can drive legally without insurance. The resounding answer, says Gorman, is, "No."
"Almost every state requires you to have auto liability insurance," she says. "The ones that don't, like New Hampshire, have financial responsibility laws, where you have to demonstrate that you have the resources to pay a claim in event of a collision.
"What we recommend, is that you buy $100,00 bodily injury protection per person and $300,000 per accident. That's one of the standard offerings at insurance carriers."
She suggests motorist consider buying a whole lot more if they have assets to protect. "If you're worth $2 million," she says, "then you better buy an umbrella policy that provides you with $2 million of liability insurance."
The same is true if you're worth $500,000, even if that reflects the value of your home.
"If you're found liable in an accident, you could lose everything," Gorman warns. "Accidents are terribly expensive."
© Copyright 2007 Globe Newspaper Company.
