Your car is usually your second biggest asset, and insurance protects that asset. We see so many people who do not know what their policy covers or what their deductible is or even what insurance company they have. Make sure you know what you are purchasing and how it helps protect you. Here is some basic knowledge about auto insurance policies that can help you understand what the heck you’re looking at.
Liability: Liability covers damages and injury to the other party in the event that you are at fault in an accident. The state minimums you must carry in Texas are $30,000 for injury to one person, up to $60,000 for everyone injured in the accident, and $25,000 for property damage. You should consider having more than the minimum liability to make sure that you are protected against having to pay any additional out of pocket expense related to a liability claim.
Comprehensive and Collision: This is required if you have a lien holder on your car, or you are leasing your car. Collision covers damages to your vehicle if you hit, or are hit by, another vehicle or object. Comprehensive covers damages to your car other than collision, such as flood, fire, hail, or your car is stolen.
Deductible: Your deductible is the amount of money you agree to pay before your insurance pays for the rest of the repair. For example, if you have a $500 deductible and the cost of the repair is $1000 then you pay $500 and your insurance company pays $500. Having a high deductible can save you money on your premium, but it may be challenging if you get into an accident. It is an important thing to think about when purchasing auto insurance.
Uninsured Motorist: This covers damages to your vehicle and injury to you if you are in an accident with a driver who does not have at least the state minimum liability. It is highly recommended, especially if you only carry liability. About 15% of Texas drivers are uninsured, and about 1 in 4 auto claims are uninsured motorist.
Rental Coverage: Rental coverage pays for a certain amount per day towards a rental car while your car is in the shop. This may not take care of all of the rental costs after taxes and fees, but if you have a least $30/day it should cover most of it. The bigger the car you have the more coverage you need.
This is a very basic overview, and by no means covers all the information you need. Ask questions when purchasing your policy, so when you need it there will not be any unpleasant surprises.