What Are the Recommended Auto Insurance Coverages?

••• Crash on the street. German auto model 2007. image by Dariusz Kopestynski from Fotolia.com

Auto insurance is required in most states and by lenders. Auto insurance protects the driver in terms of financial responsibility for any losses to himself, passengers and others involved in an accident. Insurance companies offer different types of automobile coverage. Deductibles lower the premium amounts by specifying set amounts that policyholders must pay before their insurance begins offering compensation.


If a driver is involved in an accident which he caused, he is responsible for damage to the other person’s vehicle or property as well as the injuries to anyone else involved. The two basic coverages offered by liability insurance are bodily injury (BI) and property damage (PD). BI protects the insured if there is an injury or a death caused by an accident. PD covers the insured and pays for any damage done to another’s property. Many states require a minimum amount of liability coverage that a driver must carry. In addition, having extra coverage, such as a $100,000 per person injured, $300,000 per accident and $100,000 for property damage, is a good idea. After the insurance company pays the maximum, the driver is responsible for any damages above the policy limits.


Collision insurance covers any repairs for damage from a collision or accident. The coverage amount for collision is set by the insurance company and based on the value of the automobile. Regardless of who is at fault, collision coverage pays to repair the insured vehicle. Lenders generally require a driver to carry collision insurance if the automobile is financed. After the set deductible is met by the policyholder, the insurance company covers any repair work on the vehicle. If the vehicle is totaled in an accident, the policy will pay a cash value based on the age of the car, mileage and book value.


Like collision insurance, comprehensive coverage is designed to protect the insured’s vehicle, and the value is set by the insurance company based on the vehicle's value. Comprehensive insurance pays for repairs from damage caused by hail, wind, animals, vandalism and acts of nature. For example, if a tree limb falls onto a vehicle due to high winds, comprehensive insurance would cover the damage. There is typically a deductible involved with this type of insurance.