1. Liability or No-fault Insurance
This is primary insurance that is required by the law. It covers:
- Bodily injury
- Property damage
Liability insurance covers the other driver when you are the cause of an accident.
Bodily injury pertains to injuries you cause to other drivers, while property damage refers to damage you cause to other vehicles and/or structures. The latter applies if you say rammed into a wall or a fence and so on.
Neither bodily injury nor property damage protects you or your car. This only allows the other drivers to file claims with your insurer. For liability insurance, each state has a minimum amount, written in a number format like this: 25/50/25.
This is what the numbers represent:
- The first number represents the maximum amount payable for bodily injury per person.
- The second number is the maximum amount payable per accident for bodily injury.
- The third number is the maximum amount for property damage.
State minimums range from $10,000 to $50,000 for each state, with property damage being slightly higher than bodily injury.
2. First Party Benefits
This is mostly optional (only mandatory in 12 states), and is generally costs more than liability insurance. While liability insurance covers the other driver, first-party insurance protects both damages to your car as well as your medical expenses.
It has two components:
Personal Injury Protection (PIP)
In the liability cover, you have to file a claim to the other driver’s insurer to cover you for bodily injury. Not so with personal injury protection. Under this cover, you file a claim directly to your insurer to cover your medical costs and it pays you regardless of who was at fault during the accident. Again, it complements your health insurance, providing extra protection.
Collision insurance and comprehensive insurance
This allows you to claim compensation for damage to your car regardless of who is at fault for the accident and damage. Again, you file to your insurer directly, and not to the other driver’s insurance company. This makes the process faster and easier.
Collision insurance takes up over 50% of your insurance bill, making the cost higher for expensive cars. To reduce the amount payable, you can increase your deductible amount. Deductibles range from $20 – $2,000, the higher you’re deductible, the lower your premiums will be.
A deductible refers to the amount you opt to pay out of pocket in a claim.
A higher deductible means your insurer pays less in case of an accident, and vice versa. If you opt for a higher deductible, your insurer lowers your premium, if you choose to reduce your deductible, your premiums are higher.
Now, in as much you would want to pay the lowest premium amount available, do not pick a deductible that you can ill afford. Carefully evaluate your finances and your risk level before settling on a deductible amount.
Legally, collision insurance is not mandatory. However, if you want to use your car for lease or other commercial rental services, the leasing companies may require that you get this cover. The same applies for when you have financed your vehicle.
3. Comprehensive Coverage
This takes care of things like theft, vandalism and other non-accident related occurrences. These occurrences are referred to as “acts of God.” These are eternal unforeseen and unavoidable incidences.
A comprehensive cover costs less than collision coverage, and the price can be again controlled by increasing or decreasing the deductible amount.
While this is not required by the state, if your car is financed, your financier will require comprehensive coverage on the vehicle, until you are done with your payments.
4. Rental Reimbursement Coverage
This comes into play when your damaged car is undergoing repairs after a covered loss. This cover helps you get a rental car, while you wait to get your car back. Under rental reimbursement coverage, your insurer pays a certain limit per day, for a number of days as per your insurance policy.
5. Uninsured and Underinsured Motor Coverage
Uninsured motorist coverage covers you against motorists without insurance. Typically, if you get into an accident caused by the other driver, that driver’s liability insurance is supposed to pay for any damages you incur. If they have no insurance, then your uninsured motorist coverage compensates you for medical expenses resulting from your injuries.
On the other hand, underinsured motorist coverage is when the other driver who causes an accident is insured, but their insurance limits are inadequate to cover your damage fully.
Here, you claim reimbursement for up to the driver’s limits with their insurer; then your underinsured motorist coverage covers the outstanding amount.
With these classifications of car insurance, it’s easy to see the difficulty in coming up with just one “full coverage “package. What you can do is evaluate each and see the best covers for you and to ask your insurer to give you a package deal on them.
Why are Multiple Covers Necessary?
While you can go with the state required liability package and be on your way, you want to do slightly more than that you protect yourself and your vehicle better.
For example, if you choose to depend on liability insurance solely, and an accident occurs:
- You have to contend with a long claim process because you are dealing with the other driver’s insurer instead of your own. In some instances, this process can take months before you get a payout.
- You may have to settle for amounts lesser than what you claim, meaning you have to pay out of pocket.
- Your claim might be rejected, again forcing you to pay out of pocket.
- You might have to prove who was at fault at the time of the accident.
These processes can be tedious and frustrating. With a first-person insurance cover, all these inconveniences are avoided. All you need to do is to make a claim with your insurers irrespective of who caused the accident.
Take another scenario; you have first party cover. On a rainy day, you park in your usual spot only for a branch to fall and shutter your windscreen. Now imagine this is your business’s delivery car.
In such a case, liability insurance does not come into play because no other was involved. If you do not have a comprehensive cover, you would have to pay the entire amount out of pocket. This is the importance of taking out multiple covers that edge you closer to a full coverage scenario for you and your car.
How to Make Full Coverage More Pocket-Friendly
Getting a good all-around insurance cover is expensive. However, there are a few things you can do to save some dollars on the premiums. Here are the best tips to lower your insurance premiums and still enjoy the benefits of full coverage:
1. Increase your deductible amount
If your finances allow, place a higher deductible on your policies to bring down your premiums. Ensure the deductible amount is one you can comfortably afford if it gets to that.
2. Bundle your insurance policies
Bundle your car, home and health insurance policies with one provider. This can get you a 10% discount or more. If you have more than one vehicle, insuring them all under one company can get you a discount as well.
3. Reduce coverage
If your car is old and fully paid for, you can omit the collision coverage, which actually forms a large chunk of your first party insurance premiums.
4. Shop around
Talk to different providers and request quotes to see what each would cost. Premiums vary depending on your car model and year of manufacture as well as your demographic information. See which ones give you the most discounts that you qualify for.
5. Install car-anti-theft measures
Some insurance companies will give you discounts if your car has anti-theft features. These include alarm system, etching VIN numbers on windows, wheel locks and cutoff switches. These are things that are definitely worth spending on.
6. Other exclusions
If you are over 55, you are entitled to more discounts. Some providers have discounts for retirees, teenagers and senior citizens with defense driving certification. Military, farmers and teachers also get special discounts. It is worth your time to inquire if there’s a discount that you qualify for.
The long and short of it is, you will not find an insurer with a single full-coverage policy. However, depending on your needs and finances, you can take out several plans that will cover you and your vehicle adequately.