What cover should you buy?

The answer to this question is, as always, it depends. There is no one-size-fits-all auto insurance policy, so let us start with a list of the different types of policy:

• bodily injury liability covers you against personal injury claims from anyone you might injure in a traffic accident;
• medical payments to you and and any passengers in your car at the time of the accident;
• property damage liability covers you against property damage claims, e.g. for another car you damage;
• physical damage may be either collision which covers damage to your car if there is a collision, or comprehensive which covers most physical damage to your car not caused in a collision, e.g. it is damaged in a flood; and
• uninsured and underinsured motorist which pays you when the driver at fault has no insurance or insufficient insurance

Now you know what options to consider, make an honest assessment of your own driving. If you are a young driver, the statistics say you are more likely to have an accident. Look at your driving record to date. The more speeding tickets and minor scrapes you have had, the greater your need for comprehensive cover, particularly if you drive a lot on busy roads. But if you are a more mature driver with no recent tickets or accidents, and you drive on quiet roads, you may opt for a collision only policy. Remember, unless there is a term in your auto loan package specifically requiring both, you do not have to carry both collision and comprehensive cover.

Insurance companies collect mountains of data about traffic accidents. They employ actuaries to analyze all this information to identify the types of drivers in different makes and models of cars most likely to be involved in accidents. History produces trends and this sets the premiums for different drivers in different cars. There are also statistics showing the likelihood that your car will be stolen. If you are the proud owner of a car more likely to disappear, you need comprehensive cover. However, all this information is two-edged. Claims departments have the experience to judge when your claim matches the data and when it is different. Although insurance companies like to advertize their services with reassuring statements about the way they handle claims, real world experience can be very different.

No matter which policy you have paid for, your insurer may look very hard at a claim that does not fit their expectations. For example, a low-speed collision with a high property damage claim. You may find a claims investigator at your door asking for more information. There may be inquiries made at the body shop where your car is waiting for the work to be done. At times like this, you need to know exactly what the terms of the policy say. If the insurer issues a smaller check than you were expecting, you need to know what your rights are. Put the other way round, before you buy a policy you should look at the terms to see what rights you have and what powers the insurer has. Checking out whether there have been complaints against the insurer is also useful information before you sign up.