What is liability insurance?

Liability insurance covers you when you are in an accident that is your fault. It includes two kinds: bodily injury and property damage. Bodily injury covers any medical bills and prescription costs incurred (in another vehicle or in your vehicle) and any attorney’s fees that may come from legal action taken against you. It also covers the costs of rehabilitation and any income lost because of an inability to work. Property damage refers to costs to repair the other vehicle in an accident that you caused. It also includes damage to property such as houses, mailboxes or fences. The Insurance Information Institute (III) recommends you carry $100,000 of bodily injury protection per person and $300,000 per accident. For property damage liability, other experts recommend a minimum of $50,000 in coverage.

What is an umbrella policy?

An umbrella policy takes effect only after the initial liability policy's coverage limits have been exceeded. People usually buy umbrella policies to protect themselves against the possibility of a large judgment in a lawsuit.

What is comprehensive insurance?

Comprehensive insurance pays to repair or replace your vehicle if it sustains damage in some way OTHER than a collision with another auto. Claims that fall under this category include fire, weather-related damage, such as flood or hail; vandalism, collisions with animals, such as deer; or theft of the vehicle.

What is collision insurance?

Collision insurance pays to repair your own vehicle after an accident. Your car is considered “totaled” if the repair costs exceed a certain percentage of its value. If that happens, the insurance company will offer you the actual cash value of your car.

Are collision and comprehensive insurance required?

No. It might not be cost-effective to carry such coverage on older cars that don’t have a high replacement value. However, your bank (if you are financing your car) may require that you carry this coverage until you have finish paying for your car. After your car is paid off, you have the option of dropping this coverage.

What is a deductible? How does changing it affect the cost of premiums?

When you file a claim, the deductible is the amount you pay out of your pocket before the insurance company picks up any costs. Deductibles vary by state, but are most often in amounts of $100, $250, $500 or $1,000. If you want to keep your rates lower, set your deductible higher. However, the risk in that is you will wind up paying more following an accident.

I have a life insurance policy and homeowner policy with the same company. Can I save money by using the same insurer for auto insurance?

Yes, insurers often offer discounts for bundling.

What sort of factors influence my auto insurance premium?

One is the type of car. A vehicle that costs more to repair also costs more to insure. Also, if you have a model that is popular with thieves, you can pay higher premiums as well. The National Insurance Crime Bureau charts which cars are most susceptible to theft. Another is location; motorists in areas that are less densely populated and have fewer accidents generally have lower premiums. A clean driving record is another influence.

Does the distance I drive to work have an effect? If I telecommute or carpool, will that help?

Absolutely. Insurers base premiums on the number of miles driven per year, so the less you use your vehicle for work, the less you’ll have to pay.

Should I reassess my coverage every few years to get a better deal?

Yes, because it may be a few years since your last ticket or accident, or perhaps one of your vehicles has reached the age where you no longer need comprehensive or collision insurance.

Which vehicles are the most likely to be stolen?

In 2008, according to the National Insurance Crime Bureau, these were the most popular with thieves: 1994 Honda Accord, 1995 Honda Civic, 1989 Toyota Camry, 1997 Ford F-150 Pickup, 2004 Dodge Ram Pickup, 2000 Dodge Caravan, 1996 Jeep Cherokee/Grand Cherokee, 1994 Acura Integra, 1999 Ford Taurus, 2002 Ford Explorer.