Car Insurance, Financial Advisor, Homeowner's Insurance

How to Choose a Car Insurance Policy

Car Insurance PolicyWe may grimace when we get our premium notice for car insurance in the mail because there goes a big chunk of our paycheck.  But, imagine the consequences if that vehicle was stolen or involved in a collision.  You’d not only be heartsick over the criminal activity, but potentially you’d be injured and the car damaged or totaled as a result of the collision.

Auto insurance

Getting your vehicle(s) insured is not just a smart move on your part, but auto insurance is required by most states.  We refer to the term “auto insurance” all the time –that term actually is a collection of policies that are put in place to protect you against financial loss as regards your vehicle.  There are actually three different types of policies under the umbrella term “auto insurance” and they are quickly summarized as follows:

  • Property coverage – this portion pays for damage to your car such as a collision (as a result of an accident), or damage such as vandalism, or that is storm-related, and theft (all non-accident related).
  • Liability coverage – this portion pays for any legal obligations to others you incur as a result of damaging their vehicle and/or property, or for harming them in a vehicular accident.
  • Medical coverage – this portion pays for the cost of treating accident injuries, and, depending on the extent of the injuries, may encompass lost wages and funeral expenses.

Some drivers may drop the comprehensive or collision portions of the car insurance policy when their car gets older, but, it is wise to keep the liability and medical coverage in place.  In adjusting your auto policy, always ensure you have enough auto insurance to cover the total value of all your assets (home, vehicle(s), bank accounts, and non-retirement investments) in the event you were involved in a lawsuit.
How to Choose Car Insurance

Components of your car insurance

It is important to note the mandatory requirements mandated by the State of New Jersey, i.e. all drivers must carry three types of insurance – liability insurance coverage (this pays for non-medical damages that you cause if you are responsible for the accident); personal injury or no-fault protection coverage (this pays medical expenses if you or other persons covered under your policy are injured in an automobile accident); and uninsured motorist coverage (this protects you if you are in an accident with someone who doesn’t have proper insurance coverage).

  • Liability insurance coverage is the primary reason for covering your vehicle, because, should you be involved in an accident for which you are at fault, liability insurance will cover all property damage and medical bills resulting from the accident.
  • No-fault insurance coverage means if a driver is involved in an vehicle crash, the driver relies first on their own car insurance policy to pay medical bills and attendant expenses related to the incident, with no-fault protection in place, any and all injuries and damage will be covered, no matter which driver is found to be at fault.
  • Uninsured motorist insurance coverage is a means of providing payment of any and all expenses related to a car accident, when the driver at fault fails to carry insurance, or has inadequate insurance, expenses you incur will be paid by them personally.
  • Property damage insurance coverage covers incidents with the vehicle that are non-accident related.  If you live or often park in a high-crime area, this coverage is good to have should your vehicle get stolen or broken into.  Some car insurance policies do offer a discount if you have an anti-theft or tracking device installed on the vehicle.  If you are a rural dweller or frequent a road where there are often deer-vehicle accidents, you will appreciate knowing that a run-in with a deer and nearly totaling your vehicle will not wipe you out financially.  A hailstorm, or a tree that falls across your vehicle, are also part of this insurance component.
  • Personal injury protection (a/k/a “PIP”) insurance coverage covers costs incurred from post-accident treatment, no matter which driver was at fault.  It is wise to have this coverage component unless you have broad health insurance.
  • Collision insurance is needed because an accident may either cause severe damage to your vehicle or reduce it to scrap metal.  In any event, you either want the damage corrected to return your car to a pre-accident state, and, if the vehicle is “totaled”, you will want to be paid the value of the car at the time of the accident.   Only remove this component from your vehicle policy if you have an older vehicle!
  • Gap insurance is insurance for new vehicles that are being financed, because it factors in the difference between the actual cash value of your vehicle and the balance owed on the financing of it.  This insurance coverage will pay the vehicle off in full if it is “totaled” in an accident.  Some banks will require that you have gap insurance on the vehicle until it is paid in full.
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