Insurance coverage, demystified!

In the state of Ohio, you are required by law to have liability insurance, or to provide a financial responsibility statement. If you have a loan on your vehicle or lease one, your financial company will require you to have full coverage insurance. Many people are confused by the differences in insurance types, so we are here to help clarify what types of insurance are available for your ride, and what is required by law (or your financial company).

Liability/Bodily Injury/Property Damage Coverage: This insurance is REQUIRED of all vehicle owners in Ohio. This coverage exists to cover the costs of injuries/death and property damage to OTHERS when you are at fault in an accident. If your insurance doesn't provide a high enough amount to cover the other party's medical bills, you can be sued for the remainder and have your wages garnished until the debt is fully satisfied. Be sure to look at the amounts your policy provides. If you have a low amount (for example, the state minimum in Ohio which is Bodily injury liability coverage: $25,000 per person and $50,000 per accident and Property damage liability coverage: $25,000 per accident) then you could be left with a lifetime of wage garnishment if you cause an accident. Let's say you cause an accident on I-75 and two other vehicles are totaled due to your negligence. Let's assume the other two drivers (or their passengers) aren't injured, and let's also assume that both of the other vehicles are fairly new. One of the vehicles is a new Jeep Wrangler with a value of $40,000. The other vehicle is a Dodge Charger with a value of $25,000. You will be liable to reimburse these vehicle owners a total of $65,000. If you have minimum coverage which is $25,000, you're going to be personally responsible for the remaining $40,000 that your insurance doesn't cover. Scary, isn't it? Don't fall into the trap of thinking "it won't happen to me". It's always wise to buy the most insurance coverage you can afford. Remember, liability coverage will NOT pay any of YOUR costs if you cause an accident. If you total your vehicle and only have liability insurance, you'll be on your own to replace it (as well as pay any of your own medical bills).

Personal Injury Protection: This insurance coverage covers the costs of any passengers in your vehicle in the event of an accident. Most policies cover their medical bills as well as any loss of wages, plus any costs they incur as a result of not being able to perform daily tasks due to the injury (for example, if they have to hire a maid because their injuries prevent them from being able to clean their house). PIP insurance is usually a "no-fault" coverage, which means your insurance will cover the injured party's costs whether you as the driver was at fault in the accident or not.

Collision Coverage: If you hit another vehicle, slide off the road on a snowy day, hit a pole in a parking lot, or end up with damage to your vehicle that you caused, collision coverage will pay for repairs to your vehicle (up to the deductible amount).

Comprehensive Coverage: Did you park under a tree and a limb broke off and destroyed your car? Comprehensive insurance will cover the cost of repairs (up to the deductible amount). Comprehensive coverage is for what insurance companies call "Acts of God" such as damaged caused by hurricanes, tornadoes, storms, hail, etc.

Uninsured Motorist: Above we talked about Ohio's minimum requirements for insurance coverage and showed an example of how someone could easily be left with a huge personal liability if they didn't have enough insurance coverage. This is where uninsured/underinsured motorist coverage comes in. Basically, if someone else destroys your property or injures you, and they don't have enough coverage to pay for everything, your insurance will pay the rest. (Then the insurance company will sue the underinsured motorist on your behalf to recoup their costs). You'd be surprised how often this coverage is needed.

Towing/Rental Car: So let's say you're involved in an accident. After the accident, your vehicle was towed to the body shop fore repairs. Without this coverage, you're going to have to pay the towing bill. Now, let's say the body shop says it will take a week to fix your vehicle. If you don't have rental car coverage, you're on your own to find a vehicle to drive back and forth to work while your car is being repaired.

Full coverage:  As the name implies, most full coverage policies include ALL coverages mentioned above. Each type of coverage usually has it's own separate deductible, which is an amount that YOU are responsible for paying before your insurance company pays. Most deductibles are around $500 to $1000. Lowering or raising your deductible can lower and raise your insurance premium. You will need to decide whether a lower or higher deductible works best with your unique situation.
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