What Potentially Makes Up Your Auto Insurance Policy

Educating yourself on the features that make up your auto insurance plan will help you find that happy medium in coverage. Here is a partial list of auto insurance features along with some tips that can help you adjust coverage to suit your own needs.Educating yourself on the features that make up your auto insurance plan will help you find that happy medium in coverage. Here is a partial list of auto insurance features along with some tips that can help you adjust coverage to suit your own needs.


Following an automobile accident, collision insurance provides protection for the repair or replacement of the policyholder’s vehicle. Coverage can also help if someone or something hits your car while it is parked. It is generally recommended to base this coverage amount on the value of the vehicle.

For example, Philip Reed, a senior consumer advice editor at Edmunds.com, tells CNN Money that consumers should keep collision coverage until its annual cost exceeds 10 percent of the value of one’s vehicle, but he adds that the 10 percent figure is “pretty conservative.”

“If you’re in cost-cutting mode, then you might want to drop collision when it costs 7% or 8% of the value of the car,” Reed tells CNN Money.


Comprehensive insurance covers risks from non-automobile accident events – for example, a tree limb falling on your car. Other incidents that can be potentially covered with comprehensive coverage include theft or vandalism or natural disasters. Again, depending upon the current value of one’s car, this coverage can be adjusted or removed.

Personal injury protection (PIP) 

This feature of automobile insurance covers medical expenses and other costs, such as funeral expenses of the insured, and can also cover others in the vehicle at the time of the accident and/or pedestrians struck by the vehicle. PIP is paid out regardless of fault and is a mandatory coverage in some states.

Bodily injury liability

Bodily injury liability provides coverage for your legal liability in the event that you cause an accident and the other person(s) is hurt. This type of coverage is required in most states, and motorists can adjust the amount of coverage they carry. It typically covers the damages that you are legally responsible for, and provides a legal defense if someone sues you for damages.

“How much coverage you need is a function of what assets you have to protect. If you make $30,000 a year and rent your apartment, $50,000/$100,000 [of bodily injury coverage] should suffice,” SmartMoney.com advises. “But if you make more than $75,000 a year, own a house worth $150,000 and have $40,000 in mutual funds, you should consider at least $100,000/$300,000 of coverage.”

What do those coverage numbers mean? Let’s say you have $50,000/$100,000 in coverage. The first number ($50,000) represents the maximum amount the insurance company will pay per person in an accident. The second number ($100,000) is the maximum amount per accident the insurance company will pay.

Property damage liability

Similar to bodily injury liability, property damage liability covers you if your car damages someone else’s vehicle or property and is also required by most states.

“State-required minimums are as low as $5,000, but if you total somebody’s Lexus, that won’t begin to cover the damage,” SmartMoney.com explains. “You’re better off with a minimum of $50,000 for each vehicle you own. And to be truly safe, you should have a total of $100,000 coverage.”

Of course, if the policyholder has few assets of his or her own to protect, then lower coverage would make sense.

Uninsured/underinsured motorists’ liability

This feature provides coverage to defray medical and funeral costs for the policyholder and his or her family should there be an accident with either a hit-and-run driver or a driver with paltry coverage.


  • Rental car coverage – If you don’t like the idea of paying out of pocket for a temporary replacement vehicle if your car ends up in the shop, then you may want to consider this additional feature. But be sure to look at the restrictions of this feature within your plan, such as maximum amount per day insurance will pay.
  • Towing coverage – With this feature your policy may cover a specified amount of towing and related labor costs for your vehicle.
  • Full glass coverage – That seemingly small rock that flew into your windshield on the highway can cause substantial damage. This feature potentially covers the repair and replacement costs of your vehicle glass.

Unfortunately, most people probably don’t pay enough attention to auto insurance until an accident occurs and they realize they don’t have enough coverage. Likewise, others don’t notice unnecessary and costly features within their policies.


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