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Before you can make a decision about what kind of coverage you need to pay for, you need to know what the options are. Read over the following descriptions. Some types of coverage are required by state laws, but many of these are optional. More coverage means more protection, but it also means more money out of your pocket.
Collision — Collision coverage pays for damage to your vehicle caused by collision with another vehicle or object.
Liability — This is the dollar amount that your coverage may pay to other people for their accidental bodily injury and property damage. Injury damages cover medical expenses, pain and suffering, and lost wages. Property damages cover damage to automobiles and other property.
Liability coverage also covers your own defense and court costs, if necessary.
State laws dictate how much liability coverage is required, but it's always possible to get more than the minimum coverage. The following are the minimum liability coverage amounts for Texas, according to the Texas Department of Insurance:
- $30,000 against the injury or death of one person
- $60,000 against the total amount of injuries per collision
- $25,000 against property damage
Comprehensive — Collisions aren't the only bad thing that could happen to your car. There are also damages from wind, hail, fire, flooding, vandalism, or theft. Comprehensive coverage provides for these kinds of things.
“Gap” Insurance — This covers the “gap” between the dollar value your insurance company puts on the car and the amount you owe.
For example, let's say you just bought a new car for $30,000. With financing and interests, let's round that up to $35,000. You sign your name and drive away from the dealership. Then a month later, some jerk on a cell phone runs a red light and totals your car. Given the automatic depreciation that occurs when you drive away from the dealership, the insurance company is willing to pay you $25,000 for your car. But you still owe the finance company $35,000. Gap insurance is there to cover the $10,000 difference between what your collision insurance pays and what the finance company wants from you.
Medical Coverage — This coverage pays for medical expenses arising from a collision, regardless of which driver caused the crash.
Personal Injury Protection — Often abbreviated to PIP, this coverage pays medical expenses for the insured driver for treatment due to an auto collision, regardless of which driver was at fault. PIP is required in some states, including Texas.
Comedy Guys Defensive Driving Guide to Auto Insurance, uninsured motoristsUninsured / Underinsured Motorist — Texas drivers are required to have auto insurance coverage, but that doesn't mean all of them do. And you might still be involved in a collision caused by one of these people. In that case, this coverage will make up for their lack of insurance and cover your car's damages.
And don't think that this is a small problem. An April 2011 report from the Insurance Research Council estimates that 1 in seven drivers are without insurance, both nationwide and in Texas alone.
Rental Reimbursement — This coverage will pay for a rental car if you ever have to get one because your own car is damaged in a collision. Usually the terms of this coverage include a daily allowance amount to cover the costs of the car.
Roadside Assistance — Primarily, these plans cover the cost of towing your car if that ever becomes necessary, but there are plans that cover changing tires, delivering gallons of gasoline, opened locked doors so you can get to your keys, and jump-starting an engine.
This coverage is unnecessary if you're an auto club member or if your car manufacturer already covers things like this. Otherwise, this coverage is like most insurance: it will feel like just another expense until you need it, when you'll be very glad you have it.
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