basic automobile insurance policies
This chapter will describe the most common types of auto insurance policies offered by insurance companies and help you decide which type of policy is right for you.


BASIC LIABILITY POLICIES
A basic liability policy is designed to make sure you comply with your state's financial responsibility laws but offers little or no compensationfor you if you are injured or if your property is damaged in an accident. This type of policy is designed to minimize your policy premiums.
Different insurance companies have different definitions of a basic liability package. Some may offer you a basic policy with adequate bodily injury liability and property damage liability coverages but no comprehensive or collision coverage. Other companies will offer you only the minimum coverages and limits required by your state.
Because basic liability policies vary from company to company, it is important to know which coverages you are being offered when you re shopping for quotes. For example, let us suppose you are gathering quotes for an automobile insurance policy in Ohio.
Company A quotes you for only the minimum state requirements

$12,500 per person, $25,000 per accident for bodily injury liability, nd $7,500 for property damage liability. CompanyA is not equired to ffer you medical payments coverage, uninsured and underinsured otorist coverage, or physical damage coverages, such as comprehensive or collision. You are shopping to get the lowest possible rate, so you call Company B, who quotes you at state minimum liability limits but includes $1,000 in medical payments and includes uninsured and underinsured motorist for both bodily injury and property damage.
Company As quote will be lower than Company B's because it has ncluded much less coverage on your quote. If you choose to
purchase an automobile insurance policy with Company A and you re in an accident with an uninsured motorist, you will not be able to eceive any benefit from your policy to cover injuries that you or your assengers sustain as a result of the accident. With the limited overages under your automobile insurance policy, neither will you eceive any compensation for damage to your vehicle. If you had hosen Company B, you would have been able to benefit from the ninsured motorist coverage under your policy and would have been ntitled to payment for the injuries and property you sustained as a esult of the accident.
You can avoid being inadequately insured by asking questions when ou are calling around for quotes. Ask the agent to go over what overages they are quoting and ask about medical payments overage and uninsured and underinsured motorist.
If you are purchasing a policy from an agency, be sure to sit down ith the agent or associate you are starting your policy with. Ask the gent to review the coverages with you line by line, and ask
uestions on anything you do not understand before you purchase an utomobile insurance policy. Insurance agents are required to take icensure classes and have to pass a test to obtain their license, and o they have spent a great deal of time acquiring information about nsurance. If they cannot answer your questions immediately, most gents have the resources to call an underwriter or look up the nswers to policy coverage questions.
It is also important to keep in mind that agents use insurance terms hat may not make sense to policyholders, so it can be difficult to nderstand what your policy covers unless you ask questions. If they se insurance terminology that is unfamiliar to you, ask them to xplain it in different terms so you can better understand the overage.


FULL COVERAGE POLICIES
Full coverage policies are designed to provide protection that is
greater than the state minimum, including coverage for your motor ehicle and personal property. Like basic liability policies, full overage policy coverages vary from company to company, so it is mportant to compare several quotes before making a decision to urchase a policy through a certain insurance company. If you ask for full coverage on your motor vehicle, it is also important to ask questions about the coverages and limits being quoted.
When financing a vehicle, loan companies require that you carry
comprehensive coverage, which covers losses such as glass
damage, collision with an animal, theft, and vandalism, and collision coverage, which covers the collision with another object except for an animal.

Comprehensive and collision coverage can be assigned different
deductibles. For example, you could carry a $250 deductible on
comprehensive and a $500 deductible on collision. The higher your deductible is, the lower your premiums. When choosing deductibles for comprehensive and collision coverage, you must consider how much money you could reasonably pay out of pocket if your car was wrecked or stolen.
Some companies will automatically quote coverage for towing and rental expenses. These coverages are inexpensive but could prove critical if your vehicle is damaged or disabled due to an accident.
Most companies also include lock-out services in the towing portion coverage and will reimburse for towing even in the event of mechanical breakdown.
Let us now look at an example. You call Company A and tell them you just purchased a new vehicle and need full coverage insurance on the vehicle. Company A quotes you with state minimum liability, a deductible of $1,000 for both comprehensive and collision and no towing or rental. You then call Company B and ask for a full coverage quote. Company B quotes you at state minimum liability with a $250 deductible for comprehensive coverage and a $500 deductible for collision. It also adds towing and rental.
Company A is most likely going to come back with a lower rate,
because it has quoted you with higher deductible amounts and has excluded towing and rental. Let us suppose that you choose
Company A for its lower rate. One month later, you lose control of your car and hit a utility pole. You are not injured, but your car is not drivable.

When you call your insurance company to file a claim, you are
advised that you have a $1,000 deductible you will have to pay before your vehicle can be repaired. You will not be able to come up with $1,000 for a few weeks. In the meantime, your automobile is disabled, and you have no transportation to and from work. You inquire about a rental car, but your insurance company advises you that you have no rental coverage under your policy. This leaves you with obtaining $1,000 to satisfy your deductible so that your vehicle can be repaired and the expense of renting a vehicle to drive to and from work. If you would have chosen Company B's quote, you would have to pay $500 to get your car fixed, but you would have a rental car to get you to and from work, with no extra out-of-pocket expense, while your car is being repaired.


TO ENSURE YOUR COVERAGE IS ADEQUATE
The best way to make sure you have adequate coverage is to be
informed of what coverages are available under your automobile
insurance policy and make sure you are being quoted the same
coverages by every company so that you can obtain an accurate
comparison.
You should take the time to consider what is at risk if you choose not to purchase each coverage at certain limits. You should take into account how much money you have available in your personal savings and investments to cover losses that may arise as a result of a motor vehicle accident, theft, or vandalism. If you caused an accident, would you have sufficient funds to pay for the bodily injuries or damage to personal property you may cause to others? If you are in an accident, would your health insurance coverage be sufficient to
pay for your injuries, and would you have adequate cash reserves to
pay for damage to your automobile and personal property? If you were struck by an uninsured motorist, would you be able to pay for your medical bills and for repairs to your motor vehicle?
You should not only consider the financial reserves you have
available, but also the requirements your lender may place on you if you have financed or leased your motor vehicle. Many lenders require that you carry certain liability limits and comprehensive and collision coverage to protect the lender's financial interests in the event of an accident or other loss.
Although some companies will quote you inexpensive rates for
automobile insurance, they may not provide policies with coverages that meet your needs. Ifyou have an idea of what deductibles you ant, what liability limits you are comfortable with, whether you need ninsured and underinsured motorist protection, or whether you ould need help paying for towing and rental car expenses in the vent of an accident or loss, you will be better prepared to discuss overages with your agent or insurance company to make sure you urchase a policy that meets your financial needs.
Few things are more stressful than filing a claim and finding out you o not have adequate coverage. After the accident has happened nd the claim has been filed, it is too late to add coverage or reduce eductibles. Many people believe they will never be involved in an ccident until it happens. Being informed about what your policy does nd does not cover from the beginning is the best way to save ourself from a bad financial situation.
Once you know what coverage options you need to financially protect ourself and your family, you can have each company you call quote
he limits and coverages you have decided on and then choose the ost economical quote. It is important to always remember that the nsurance policy with the cheapest monthly payment available does ot always provide the best coverage to protect you and your family.
If you are in an accident and do not have adequate coverage, you ould potentially end up in a financially disastrous situation.
In the next chapter, you will learn about ways to save money on your utomobile insurance policy while obtaining the coverage you need.