Auto Insurance is a package made up of several discrete parts, one of which is auto liability insurance, itself divided into parts. Liability insurance protects the driver and owner of a vehicle from losses incurred if he is responsible, or liable, to pay. In other words, if an accident or incident is deemed the fault of the insured, then car liability insurance will protect him from judgments if he is sued or may be sued by the injured party. An insurance company will attempt to settle a case before it reaches the stage of going to court, to save court costs.
Bodily injury liability covers losses which occur if a person involved in an accident is injured or killed, whether a passenger in the insured’s car or another. Bodily injury insurance also pays for the injuries of a pedestrian. Bodily injury liability will cover injuries sustained while a non-insured person is exiting or entering a vehicle owned by the insured. If your child’s friend closes her fingers in the car door, your auto liability insurance coverage will pay damages. If your child does this, another part of your auto insurance policy will pay.
Property damage liability protects the insured person from losses due to damage to any other vehicle or property, such as fences, posts or poles, houses, or property carried inside the car that belongs to another. Also covered are losses due to theft, fire or flooding of another’s property while in the insured car. Property damage liability will pay if your car strikes a tree that falls on your neighbor’s home. If you help the neighbor move and your car is stolen, your insurance will pay to replace his property.
In view of the high dollar damages possible after an accident, most agents refrain from writing only liability amounts required by law and lien holders, in some states as low as $15,000 per person and $25,000 per accident. The average policy is written with $100,000 per person and $300,000 per incident or accident. That means in a given accident, each person injured may collect up to $100,000, but if one sues for $300,000, no money is available for others. Then, personal assets are subject to loss. It is therefore important to carry an amount high enough to protect the insured’s assets.
Automobile liability insurance may be supplemented for reasonable premiums by a Comprehensive Umbrella Liability Insurance Policy. An umbrella starts where the auto liability leaves off and covers up to $1 million, $2 million, or even $3 million where assets are of high value.
Liability insurance covers more than the ordinary medical expenses of a person injured in an accident. Sometimes, people become disabled and are never able to work again. In that event, the victim will expect compensation for loss of future income and long-term medical care. Sometimes, medical expenses are extremely high. A broken leg that fails to heal may entail multiple surgeries.
Injured persons also frequently demand punitive damages following an accident, particularly if the error or wrongdoing was egregious, such as driving under the influence of intoxicants. In that event, damages can be far more than the true cost of an accident, to serve as punishment to the driver or owner.
The cost of liability insurance varies widely from state to state and from company to company. An Allstate policy in Oregon costs nearly three times as much for a good driver 60 years old than a State Farm policy. However, that situation is usually a temporary condition. Companies keep rates low in order to sell policies, and when losses rise, must raise their rates. Then companies whose rates were high become more competitive.
Insurance companies must, by law, make profits, in order to have money available to pay losses. Don’t be fooled by companies that advertise, “Most people who switched saved hundreds of dollars.” It is likely true. However, it is also true that people who switch usually do so as their tickets and accidents are aging, and therefore take advantage of rates available to drivers whose records are now clean for three years. They would probably save as much staying with their present companies.
Most importantly, if you switch companies to save money, be sure you are comparing apples to apples. Some agents will lower coverage to save you money. Be sure to compare similar coverage and similar discounts. Don’t trade a 100/300 policy for a 50/100.
Discounts abound for auto insurance. Ask your agent if you have all that are available: good student for teen drivers, safety classes for over 55 drivers, 2-car, multiple policy and low mileage discounts are only a few of those you may qualify for.
Together with a good driving record, good discounts and a little comparison shopping can help you pay a reasonable amount for auto insurance.
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