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Property Damage Coverage

The most commonly recognized coverages, in addition to the basic liability package outlined above, are collision and comprehensive coverages.

1.) Collision coverage pays for physical damage to your car as the result of your auto colliding with an object, such as a tree or another car. This is relatively expensive coverage. Remember, this coverage is optional and not required by law. However, collision insurance may be required by your lending institution or lessor.

If you have an older vehicle worth less than $2,000, there is little reason for you to purchase collision coverage, because you are likely to pay more money in premium than you would ever receive as a result of a claim. Auto insurance policies only require the company to cover your financial expenses, not to replace your vehicle. In the case of an accident involving an older car, the cost of repairing the car can quickly exceed the worth of the car. In that case insurers will "total" the car and pay you what the car was worth rather than fixing it. In severe cases, the worth of the car may not exceed the premiums paid for the coverage.

2.) Comprehensive coverage pays for damage to your auto from almost all other causes, including fire, severe weather, vandalism, floods and theft. Comprehensive coverage also will cover broken glass, such as windshield damage. Comprehensive coverage is less expensive than collision coverage and many consumers choose to carry it. However, remember it is your choice: you are not required by law to carry comprehensive coverage.

When considering collision and comprehensive coverage, you should consider your deductible. A deductible is an amount of money you agree to pay as part of a claim before the insurer is committed to pay the rest of the claim. For example, if you carried collision coverage with a $200 deductible and you had a $500 loss, you would have to pay $200 and the insurance company would have to pay the remaining $300.

Basically, deductibles reduce your premiums because you agree to deduct a set amount from the claim your insurer otherwise would have to pay. Insurance companies offer deductibles because they reduce the number of small claims, which are costly for them to handle.

If you purchase a new car with a loan, the financial institution that loaned you the money may require you to purchase comprehensive and collision coverages. This is because they see your car as collateral for the loan, and they want to make certain it is worth something if they need to repossess it.

In the event you have to buy, or decide to buy, collision or comprehensive coverage, you can save money by agreeing to the highest deductible you can afford to pay in the event of an accident. However, since comprehensive coverage is usually cheaper than collision coverage, many people save money by dropping the collision coverage and keeping the comprehensive coverage to protect against natural perils, theft and glass breakage.

Other Optional Coverages

Insurance that covers the medical bills of drivers and their passengers is not usually required in states without no-fault laws. However, you may decide to purchase this coverage.

Be cautious when purchasing these coverage's. They can duplicate coverage that you may pay for through other insurance policies. For instance, medical payments coverage may duplicate health or disability benefits that you buy individually or receive as a benefit through your job. Before purchasing these coverages, review them and your other insurance policies carefully.

1.) Medical payments coverage is one such optional coverage. This coverage pays the medical and funeral expenses lot you or others injured or killed in an accident while riding in or driving your auto. Claims against this coverage include all reasonable hospital, surgical, chiropractor, X-ray, dental, professional nursing, prosthetic and funeral expenses. It will also cover you or members of your family if you are struck by an auto while walking or while riding in another auto. This coverage will pay for your medical and funeral expenses even if you cause the accident. Usually, only expenses incurred within a specified period of time after the accident are included.

2.) Rental reimbursement coverage usually pays $15 to $20 a day to rent a car for a specific number of days while your vehicle is being repaired. The premium will vary from insurer to insurer.

3.) Towing and labor coverage pays the cost of towing your car to the repair shop subject to the limit of your policy. Premium for this coverage can run as low as $5 to $10 per year. However, if you are a member of an auto club, you probably already have this service and may not want to duplicate your coverage.