An auto insurance policy is designed to provide you with a level of protection against property, liability and medical costs if you are involved in an accident.
- Property coverage pays for damage to the car of theft of your car
- Liability coverage pays for your legal responsibility to other for bodily injury or property damage.
- Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
Comprehensive and Collision
Collision – Covers damage to your car when your car hits, or is hit by, another vehicle or other object. Collision pays to repair your vehicle, less the deductible you choose. For older cars, you may want to consider dropping this coverage, since it is typically limited to the cash value of your car. This coverage is not required by a state, but if you have a loan or a lease, then the lien holder will require it.
Comprehensive (Other Than Collision or OTC) – Covers your vehicle, and sometimes other vehicles you may be driving, for losses resulting from incidents other than collision. This includes damage to your car if it is stolen or damaged by flood, fire, falling objects or animals. States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist that you carry it until your loan is paid off.
Selecting Comprehensive and Collision Deductibles
Collision coverage is generally sold with a deductible of $250 to $1,000; comprehensive insurance is usually sold with a $250 deductible. Opting for a higher deductible is a way of lowering your auto premium. Remember, the higher the deductible, the more you’ll pay out of pocket in case of a claim. When deciding on a deductible that’s right for you, take into consideration your available cash, disposable income, the value of your vehicle and your tolerance for risk.