An auto insurance policy includes several different kinds of coverage. Your independent insurance agent will provide professional advice on the type and amount of car insurance coverage you should have to meet your individual needs and comply with the laws of your state. Here are the principal kinds of coverage that your policy may include:
Liability for Bodily Injury
The minimum coverage for bodily injury varies by state and may be as low as $10,000 per person or $20,000 per accident. However, in Arkansas a minimum of $25,000 per person for bodily injury and $50,000 per accident is required. Many auto policies stop at a maximum of $300,000 or $500,000 per accident for Liability coverage. So, if you injure someone with your car, you could be sued for a lot of money.
The amount of Liability coverage you carry should be high enough to protect your assets in the event of an accident. Most experts recommend a limit of at least $100,000/$300,000, but that may not be enough. This is no place for cheap auto insurance. If you have a million-dollar house, you could risk losing it in a lawsuit if your insurance coverage is insufficient. You can get additional coverage with a Personal Umbrella or a Personal Excess Liability policy. The greater the value of your assets, the more you stand to lose. Therefore, you need to buy liability insurance appropriate to the value of your assets.
Liability for Property Damage
The minimum that you must carry varies by state, but in Arkansas, the minimum coverage amount for property damage is $25,000. With many cars costing around $50,000, you could easily be responsible for a substantial repair bill if you hit someone’s car and it’s totaled. If you have a Personal Umbrella policy, you will be covered for excess costs. However, your insurance company may require that you carry more than the minimum to qualify for a Personal Umbrella policy.
Uninsured/Underinsured Motorist Coverage
If you are involved in an accident and the other driver is at fault but has too little or no insurance, this covers the gap between your costs and the other driver’s coverage, up to the limits of your coverage. In some states, this coverage is limited to bodily injury, while in others, like Arkansas, property damage can be added as well. The limits required and optional limits that may be available are set by state law.
Covers the cost of damage to your own car in an accident. You don’t have to figure out how much to buy – that depends on the vehicle(s) you insure. But you do need to decide whether to buy this coverage, and how large a deductible to take. The higher the deductible, the lower your premium will be. Deductibles generally range from $250 to $1,000. Collision coverage is important to have if a car is new and valuable. As the value of the vehicle decreases, Collision will become less important. If the car is only worth $1,000 and the deductible is $500, it may not make sense to buy collision coverage. Collision insurance is generally not required by state law, but is required if you are financing a vehicle purchase.
Covers the cost of miscellaneous damages to your car not caused by a collision, such as fire, hail and theft. As with Collision coverage, you need to choose a deductible. The higher deductible you choose, the lower your premium will be. Comprehensive coverage is generally sold with Collision, and together the two are often referred to as Physical Damage coverage (or “Full Coverage”). If the car is leased or financed, the leasing company or lender may require you to have Physical Damage coverage, even though the state law may not require it.
Covers the cost of medical care for you and your passengers in the event of an accident. The limit you choose under Medical Expenses coverage is the maximum that’ll be paid for medical claims to each driver. Therefore, if you choose a $2,000 Medical Expense Limit, each passenger will have up to $2,000 coverage for medical claims resulting from an accident in your vehicle.
Personal Injury Protection (“PIP” or “No-fault”)
This coverage, required by law in some states, covers your medical costs and those of your passengers, regardless of who was responsible for the accident. The limits required and optional limits that may be available are set by state law. In Arkansas, it is required that auto insurance policies include $5,000 of PIP coverage.
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