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Automobile insurance
Most states require that every registered vehicle carry some sort of auto insurance. However, even if there were no such requirements, all drivers would be wise to think carefully about how much and what kind of insurance coverage they need. But before anyone purchases insurance, he or she needs to know what type of insurance is available.
Liability insurance
Every state except Mississippi, New Hampshire, Tennessee, and Wisconsin requires some level of liability coverage. This type of insurance covers the other person’s costs if there’s an accident.
Even though the states listed above do not require liability coverage, it is wise to carry some level of liability insurance. Because drivers’ liability is so great, liability insurance is relatively inexpensive compared to losing everything in a lawsuit, and purchasing liability insurance is a prudent decision (see Proverbs 22:3).
Although there are three kinds of liability insurance—bodily injury, personal injury, and property damage—generally only bodily injury and property damage coverage is required in the states that demand liability coverage.
Bodily injury expenses include medical bills, rehabilitation expenses, lost wages, or expenses associated with death of other people as a result of a car accident.
Personal injury expenses include medical expenses, lost wages, substitute services, and death, no matter whose fault the accident was and whether the injured was riding in the insured vehicle, getting in or out of the vehicle, or was struck as a pedestrian.
Property damage expenses include the repair or replacement of any items belonging to another person that were damaged or destroyed resulting from a car accident. This would include the automobile, houses, buildings, livestock, or any other property owned by the other person.
Liability insurance usually covers the named insured or the person or people named in the policy, the spouse of the named insured, any licensed driver living in the household with the named insured, or any licensed driver who has permission to drive the vehicle of the named insured (anyone who steals an insured vehicle is not covered).
Those protected by an insured’s liability policy include people in other vehicles, guests in the insured’s vehicle, people occupying other property that is damaged in a car accident by the insured, or pedestrians.
The vehicles that usually are covered by liability insurance are the vehicles named in the policy, any vehicle that replaces the insured’s original named vehicle or any additional vehicles that the insured owns during the policy period, and temporary vehicles (including rental vehicles).
Collision insurance
Collision coverage will pay for the repairs to the vehicle of the insured if the insured is at fault. It does not cover the vehicles of anyone else involved in the accident. Collision coverage is usually the most expensive type of vehicle insurance.
For this reason before choosing this kind of coverage, assess the value of the vehicle to make sure it is worth the amount that will be paid for the coverage.
Usually, a deductible is written with collision coverage. And the insurance company will pay only the actual market cash value of the car, not the amount that has to be paid to repair it. Therefore, if a vehicle is an older model (more than five years old), collision coverage may not be worth the expense.
Nonetheless, if the vehicle is financed, the lender will generally demand that collision be carried on the vehicle, at least until the loan is paid off.
Comprehensive insurance
Comprehensive coverage pays for damage to insured cars that was caused by events other than a car accident. Covered damages would include theft, fire, vandalism, and natural disasters, such as hail or tornado—even hitting a deer. Comprehensive coverage usually insures only the actual value of the car or the part damaged on the car, not the replacement value.
Before choosing this kind of coverage, check the value of the car. If the car has a low value, paying high premiums for comprehensive coverage may not be fiscally wise, especially if it is over the insured’s automobile insurance budget.
Uninsured or underinsured motorists insurance
Uninsured or underinsured motorist coverage pays for injuries to the insured if the insured is hit by a hit-and-run driver or by someone who does not have adequate insurance (either no liability insurance coverage or not enough coverage). Normally this type of insurance is limited to bodily injuries and will not pay for damage to the car or any other property.
Full coverage
Full coverage on a vehicle includes all basic coverage—liability, uninsured motorist, collision, and comprehensive. If the car is new, full coverage should be considered. Full coverage can usually be purchased in conjunction with an auto loan or separately from an insurance agent.
No-fault insurance
About half of the states in America have some form of no-fault law that requires drivers to carry insurance that will pay for their own medical bills and lost wages, up to a certain dollar amount, regardless of who was at fault in an accident.
However, no-fault usually does not cover property and vehicle damage. The intent of no-fault laws is to eliminate injury liability claims and lawsuits in smaller accidents.
Other available coverage
Death and dismemberment insurance covers the insured and the insured’s family if there is a death or loss of a limb in an automobile accident.
Towing insurance pays a portion or all of the towing charges if an insured car breaks down.
Rental car reimbursement provides the insured with a car while the insured car is being repaired.
Conclusion
“A prudent man see evil and hides himself, the naïve proceed and pay the penalty” (Proverbs 27:12). If people do not look ahead to see the potential evil and protect themselves, they will most likely end up paying the penalty of such neglect. In most states, driving without liability insurance is not just bad judgment, it’s illegal.
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Author: |
Crown Financial Ministries |
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