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Most of the states today follow financial responsibility laws and the tort system of rules. Financial responsibility means that a driver should have enough finances to pay for the damages in an accident. Every state follows one out of two states for auto insurance. It is either the tort system or the not fault system.
According to the tort system, in case of an accident, one of the drivers involved is found to be responsible for the accident. This person will then have to pay for all the damages caused. The at-fault driver can also be sued by the not at fault driver for damages. Most of the states in America have made auto insurance mandatory and most of the people are complying to ensure they do not have to pay for damages out of their own pockets.
This article tries to explain the different types of auto insurance coverage policies and help you take a decision regarding which policy should be chosen. The most basic would be liability.
Every state that has made auto insurance mandatory has also fixed a minimum amount that each driver has to be insured for. This is known as the minimum liability. This is the most basic amount that one can be insured for. However, this policy does not offer a lot of protection. In case of an accident, the insurance policy should pay for the damages caused. Minimum liability, as the name suggests is just the minimum and most of the damages will not be covered. You will have to end up paying out of your own pocket.
It is ideal to go in from liability that is for a sum larger than the minimum sum. The ideal amount is for a hundred thousand dollars per person and three hundred thousand dollars for bodily injury in total. Bodily injury is insurance policy that will help pay for the medical costs incurred by the victim of the accident you might have caused. Minimum liability usually includes property damage as well. Apart from the medical costs incurred, you will also have to pay for the victim's car. You will have to pay for the cost of any repair work done and even replacements. The ideal amount for this policy is around fifty thousand dollars. Property damage will also pay for any damages caused to buildings, fences and lamp posts.
Physical damage policies are very advantageous. Collision damage policies will pay for damages caused to your car during an accident. Minimum liability will only cover the victim's car's damages. Comprehensive damage will help cover the costs of any physical damage that might be caused to your car when it is not involved in an accident. This includes damage due to natural agents like rain, hail or snow. It will also cover damages caused during theft or if your car has been vandalized. The huge advantage with physical damage policy is the fact that it can save you a lot of money on insurance premiums if you raise the deductibles sufficiently high.