Many people buy insurance without knowing what they are purchasing. Below is a brief summary of the most common coverages.
Liability. If you are at fault for an accident and have damaged property (the other driver’s car) and/or caused an injury, liability will pay the other party. Typically, there are three numbers, such as 100/300/100. The first number 100 is the maximum your insurance will pay to one person for bodily injury. The second number 300 is the maximum your insurance will pay for bodily injury for one accident if there are three or more claimants. The third number is the amount your insurance will pay for property damage. If you have assets or own a home, it is good to have a lot of liability coverage to protect your assets in case you are sued.
Medical Payments. This pays medical bills for you and your passengers regardless of fault. Medical payments coverage comes in handy on many occasions, such as when you are taken by ambulance to the hospital. Your health insurance might not cover a bill due to a deductible, or the provider might be outside of your network, but med pay usually has no deductible and no network.
Uninsured Motorist Coverage. When the other party is uninsured, underinsured, or in case of a hit and run, your insurance will cover you as if the other party had insurance. This coverage is very important and is used more often than you might think.
Collision. Collision covers the damage to your car as a result of a collision with another vehicle or object. Some people don’t buy collision coverage when their car is old. However, I don’t believe that theory. If you are in an accident and the other party is disputing the claim, not having collision coverage is a headache. Also if you have collision coverage you can save money when renting a car.
Comprehensive: Provides coverage caused by theft of damage not from a collision such as a fire or a tree falling on your car.