Different Auto Insurance Options Explained

Car accidents happen. Experts say the average American driver will experience a collision every 10 years. However, Boston drivers average one accident every three years. The Boston Globe newspaper reported that motorists are 157.7 percent more likely to get in a crash than other drivers in the U.S.

While it’s the law to have minimum insurance coverage as a Massachusetts registered driver, there are a lot of options about the minimum to choose from. Any option will affect the insurance premiums, but may also help down the road.

 

What is Auto Insurance?

Basically, auto insurance is a contract. It’s a legal agreement between a vehicle owner and an insurance company. The owner agrees to pay premiums for the policy and the insurance company agrees to cover your losses that are laid out in the insurance policy. To what extent that happens is determined by the coverages chosen by the owner and offered by the insurance company.

 

How Much Do I Need?

In an attempt to save money, some may choose to find the lowest insurance premiums and basic coverage. While this saves money upfront, it can become a headache in the event of an accident.

“If you’re found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket,” warns the Insurance Information Institute. “These costs could wipe you out!”

 

Massachusetts Minimums

The State mandates minimum limits, that is, the maximum amount the insurance company will payout for a claim. All registered Massachusetts drivers must have these limits in their policy and pay for them with premiums.

• Bodily Injury to Others
  • $20,000 per person
  • $40,000 per accident
• Personal Injury Protection (PIP)
  • $8,000 per person, per accident
• Bodily Injury Caused by Uninsured Motorists
  • $20,000 per person
  • $40,000 per accident
• Damage to Someone Else’s Property
  • $5,000 per accident

 

Buying Additional Coverage

In addition to the minimums, having additional coverage is wise. The Centers for Disease Control and Prevention (CDC) found that in 2013 crash deaths resulted in $44 billion spent on medical and work loss costs in the United States. Massachusetts accounted for $438 million. The National Highway Traffic Safety Administration found in a 2014 report that $1 trillion was lost in 2010, which included the CDC crash deaths amount. This amount came from $277 billion in actual cost, and an estimated “$594 billion in harm from the loss of life and pain and decreased quality of life due to injuries.” In a nutshell, that’s what auto insurance is paying for and when it doesn’t cover enough, that’s what a policyholder pays out of pocket.

Policyholders can choose to pay premiums that cover higher limits than the state requires and also add-in optional coverage.

 

Coverage Types

• Liability Insurance – Property Damage and Bodily Injury
  • Pays for bodily injury to others or property damage. This takes care of any damages the policy owner’s car causes in an accident. It can also cover repairs to the policy owner’s vehicle and medical payments.
  • The Insurance Information Institute recommends buying additional coverage than the state minimum as “the required coverage is pretty low” and the costs will likely be higher if an accident occurs.
• Collision Coverage
  • Pays for damage to the policy holder’s vehicle when they hit another vehicle, object (like a pothole) or flipping over.
  • “Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible.” (Insurance Information Institute)
• Comprehensive Coverage
  • Pays for loss due to theft or damage caused by something other than another car (like falling objects, fire, explosion, weather-related events, etc.)
  • Some companies also cover windshield damage under comprehensive coverage
• Personal Injury Protection (PIP)
  • Pays for treatment of injuries to the driver and passengers of the policyholder’s car. May also pay for funeral costs
• Uninsured/Underinsured Motorist Protection
  • Pays for property loss and medical costs if the at-fault driver has insufficient insurance to pay.
  • This can cover the policyholder, family members or a designated driver
  • Also, covers hit-and-run situations

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