How Insurance Works: Auto Policy Components
Too often, we see people shop insurance by price, resulting in agents decreasing important coverage to cut premium which leaves you under-insured and liable. There are many different parts of an insurance policy and most people don't have the time or desire to study insurance contracts in their free time. That's why we decided to create a quick run down of the 6 components that make up your insurance policy so you can make educated decisions when shopping for insurance.
1. Bodily Injury Liability: Coverage for Others
This coverage protects you during an at fault accident in which someone was hurt or killed. Most financial experts recommend having limits of at least $100,000 per person and $300,000 per accident ("100/300") to protect your assets.
2. Property Damage Liability: Coverage for Others
Usually this coverage pays out during an at fault accident in which you damaged another party's property, commonly a vehicle but can also cover things like buildings, poles and garage doors.
3. Collision: Coverage for You
This covers damage to your vehicle if the accident is your fault or if the other person's insurance denies the claim. This coverage may be required by a lender if you have a loan or lease your vehicle.
4. Comprehensive: Coverage for you
This covers damage to your vehicle for everything else that isn't covered by collision coverage such as hail, fire, theft, flood, earthquake, wildlife, falling objects and more.
5. Uninsured/Under-insured Motorist: Coverage for you
This pays for medical and other expenses if you were hit by a driver with no insurance or with inadequate auto insurance. Coverage for your vehicle will fall under collision so this primarily pays for bodily injury, lost wages and more.
6. Medical Payments
This is primary coverage for medical expenses you and passengers incur if involved in an accident, regardless of fault. Each state has variations of this coverage but in Colorado it is a flat amount starting at $5,000 which applies per person involved.
There are 6 different parts of your auto policy that provide coverage for different risks and parties. Depending on where you live, some types of coverage are required by state law and others are optional. Each coverage has its own premium and add up to the price of your auto insurance policy.
You can reference back to this guide when comparing car insurance quotes with different carriers. Don’t want to do the work yourself? Contact us if you are looking for insurance in Colorado: (303) 960-5290 or quote@denverwestinsurance.com