Twenty Something Sense

One of our audience members requested a blog regarding Auto Insurance – and their wish has been granted. Although we have had blogs specifically stating – “don’t own a car” – the reality is that many people still need or want a car. With ownership of a car comes Auto Insurance which can be a scary beast to tackle if you’re not a Harvard Law grad. In this blog I’ll look to give some basic definitions and pointers for Auto Insurance.

Car insurance has 5 parts that you’ll want to know about:

1. Liability Insurance (Bodily and Property) – This coverage pays for damage you do to others and states require certain minimum Liability Insurance. This insurance will cover legal fee’s, repairs and medical expenses. The general coverage suggestion is $100,000 per person and $300,000 per accident for Bodily Injury Liability. In addition, at least $50,000 of property damage is suggested. Keep in mind that if you cause $100,000 in bodily injury and you only have $50,000 worth of coverage, you will be sued for the remaining amount.
2. Collision and Comprehensive Coverage – Collision coverage pays for damage to your own vehicle in an accident while Comprehensive coverage pays for damage to your car from something other than an accident (ie: theft). As you are protecting your own car, this is a matter of opinion on how much you should hold in coverage along with the type of vehicle. The best way to control this is the deductible which generally ranges from $250 to $1000.
3. Medical - There are 2 types, Medpay and PIP. At the basic level they are similar in that they cover medical expenses and lost wages for yourself and any passengers. You will need to check with your state (or insurance provider) to understand which one is required.
4. Uninsured Motorist – Pays for medical bills if you are hit by an uninsured motorist or are the victim of a hit-and-run. This is required in most states.
5. Extras – This includes road-side assistance and rentals (while your car is repaired).

Other than liability insurance much of the insurance costs are a crap-shoot. Trying to determine when you’re going to be in an accident is impossible. There is a happy medium that you should shoot for to make yourself comfortable without spending a fortune.

Does this help? Have I confused folks more? What do others suggest?