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The basic guide about auto insurance

Date: Mar 28 2010
Filed In: Auto Insurance101

For most people buying a new or used car is the first major purchase, actually a new car is second only to a home as the most expensive many consumer made. With vehicle prices at averaging over $25,000, is easy to see why someone would want to protect that investment. Before we talk about the coverage of the automobile itself I like to start with what many people believe is the most important coverage of all: Liability Coverage

Liability coverage pays for injuries or damages you or someone else driving your car caused by other people or their property.

The two liability coverage are call
1. Bodily injury liability
2. Property damage liability

Every state has different laws to dictate the minimum coverage you must carry. Some states even require you to prove you have insurance before driving your vehicle and other states use the honor system when you only provide your auto insurance proof when you have an accident or some kind of traffic violation.

A typical state requires minimum coverage is 25/50/10, I will give you some example of what that mean later on.

There are four states that do not require the drivers to carry any liability coverage because it is not require by law but that doesn’t mean you don’t need it. Here are the four states that do not require you to have liability coverage:
1. New Hampshire
2. South Carolina
3. Virginia
4. Wisconsin

Let’s say you have an accident, you were distracted and crashed into another vehicle ahead of you. There were three people in the other vehicle and all suffered some sort of injuries. If you were carrying a liability coverage of 25/50/10, that mean your auto insurance company will cover the cost of any one person’s injury, medical expenses, pain and suffering, and out of work wages up to $25,000 for one person’s injuries.

However, the auto insurance will not pay more than $50,000 maximum payment for all injuries, regardless of the number people and injuries. This is the bodily injury portion. Also, your auto insurance company will pay up to $10,000 for the property damages.

In our example, three people were injured and let’s say there injuries for the medical costs total $75,000. Their vehicle has a damage of $13,000. This means your policy will pay $50,000 for all injuries and $10,000 for the property damages. However, you still have to pay the rest at $28,000. That is 25/50/10.

Who will pay the $28,000? Once a policy paid the maximum limits, you will be responsible for the remaining amount. It is generally recommended that you carry more than the state minimum coverage to protect yourself from this financial risk.

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