March 22, 2011

When Optional Auto Insurance Coverage Is A Good Purchase

Auto insurance coverage is something nearly all motor vehicle owners are required to make, as nearly every state has laws mandating it. Each state has its own requirements as to what type and what amounts of car insurance are needed and most will not allow an automobile to be registered without proof that such insurance has been obtained. In addition to what's required by law, various types of optional auto insurance are also available and it's a good idea for those considering the purchase of a policy to become educated about what options are offered and the benefits of each.

To fulfill statutory requirements, most jurisdictions require prescribed amounts of liability auto insurance coverage. This form of insurance is meant to pay for damage the policyholder does to others. It can be considered as third party protection since it pays no benefits directly to the insured. Benefits, instead, are paid to the others in an incident in which the policyholder is involved and determined to be liable. It covers bodily injury and/or property damage, within the dollar limits of the policy.

If you are involved in a vehicle accident that causes injury or property damage to another there's a good chance you will also suffer a certain amount of bodily injury or property loss yourself. If you are injured you may require medical treatment and perhaps hospitalization. Your vehicle may also be damaged and require repair or replacement. In this case, in order to receive benefits from your policy, you must have optional auto insurance in force. A basic liability policy will pay nothing toward your own medical costs or vehicle damage. For this, you need optional coverage.

The three most common types of optional auto insurance added to a basic policy are collision, comprehensive and personal injury protection (PIP). Collision coverage is what will pay to have your car repaired in the event of a collision.

Comprehensive auto insurance coverage pays benefits when your vehicle is affected by something other than a collision. This could include theft, vandalism, fire and acts of nature. These two options both carry a deductible amount determined at the time the policy is written. Both are considered a wise purchase if your car is not something you could easily replace with your own funds. If the car's purchase is being financed, the lien holder will probably require both options be included in your policy.

PIP may or may not be a smart purchase, depending on how good your personal major medical coverage is. For those without separate medical and hospital coverage, PIP is probably very important to consider. If you already carry good medical coverage, it may be redundant.