Ensure Your Future

By Chelle Cordero

August 21, 2009 5 min read

It's all about protection -- for yourself and for those you come in contact with.

You are responsible for any damage you may cause while driving your car, and a good insurance policy can protect you, your family and the things you've worked hard to have. But how much protection do you need, and what can you do if you can't afford it?

Most states have minimum guidelines regarding insurance, and carrying insurance is mandatory in most of the United States. (Alaska has several territories where insurance is only required for registered vehicles, and registration is not mandatory.)

Minimum limits vary from state to state -- Florida requires minimum bodily damage per person of $10,000, while Texas requires $20,000. Vermont mandates minimum property damage coverage of $10,000 for injury to or destruction of property of others in any one accident, while South Carolina requires $25,000.

In the "Anatomy of an Auto Policy," distributed by State Farm Insurance Company in Bloomington, Ill., customers are advised, "When shopping for insurance, it's important to look at more than the total cost. Become familiar with the amount and type of coverage that is being offered.

"Also, note what isn't being covered, who is covered while driving your vehicle and the quality of customer service in the event of an accident. The bottom line is that you should understand your policy and buy the amount of insurance you think you need."

There are some basic terms you need to know about automobile insurance when picking your policy. Each provide coverage for different elements of an accident:

* Bodily Injury Liability -- Covers claims and lawsuits by people injured as a result of an accident you cause.

* Property Damage Liability -- Used in claims and lawsuits for property damaged as a result of an accident you cause.

* Personal Injury Protection -- Coverage for injuries sustained in an automobile accident by you or other persons covered under your policy.

* Uninsured/Underinsured Motorist Coverage -- This pays for property damage or bodily injury if you are in an accident caused by an uninsured motorist (a driver who does not have the minimum level of insurance required by law) or a driver who is insured, but who has less coverage than your underinsured motorist coverage.

* Collision -- Covers damage to your vehicle as the result of a collision with another car or other object.

* Comprehensive -- This is used for damage to your vehicle that is not a result of a collision, such as theft of your car, vandalism, flooding, fire or a broken windshield. It also pays if you collide with an animal.

Most coverages, particularly those that ensure damages to someone else will be paid, are mandatory. In some states, additional underinsured motorist coverage is optional. Collision and comprehensive is almost always at the buyer's discretion -- however, if your vehicle is financed, it may be a requirement of the finance company.

There are other optional coverages that are nice to have, such as rental reimbursement in the event your vehicle is damaged in an accident.

When it comes to picking your policy, Becky McMenomy, a licensed agent with Ike Tolks in Petaluma, Calif., said, "To know what liability limits a person should carry, they need to do a quick financial analysis to determine what assets they have that can be at risk in a lawsuit -- equity in a home, savings, even their paycheck. A person should have higher liability limits than their assets."

Variables such as age, gender, personal driving history, region, the car itself and even the driving records of others with the same risk factors will play an important part in premium rates. "If a person can't afford what they think they need, I work with my policyholders and prospects to find coverage they can afford," she said. "We can use higher deductible options, lower liability limits and take off any fringe coverages. Then we can increase things back up to where they should be as the customer can afford to."

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