INSURANCE CENTER: Auto

What are first-party property coverages and do I need them?

Auto Insurance Basics
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This is the most straightforward of the three main coverage areas. First-party property is just your stuff. In the world of auto insurance, this usually means your vehicle.

Collision insurance covers damage to your vehicle resulting from an automobile accident, regardless of who is at fault or even whether there was another car involved (sorry, you can't insure your pride). In the event that someone else is at fault, your insurance company may go after the other guy's company for the money, but this won't matter to you. Your collision insurance covers you either way.

The poorly named comprehensive insurance covers damage to your vehicle that is not caused by an automobile accident. Common examples include hail damage and theft. Check your policy to see which acts of nature and fate are covered.

With collision and comprehensive coverage, you don't have to choose any limits. It's a yes/no question. If you still have a loan out on your automobile or if you are leasing, you won't even have to make this decision. The bank or lessor will require you to purchase both.

If you own your vehicle, free and clear, your decision will depend on its book value. You probably won't get any more than this from the insurance company, regardless of how well you've taken care of your four-wheeled baby.

Check your declarations page for a premium breakdown. Collision and comprehensive are usually the two most expensive coverages. If continuing to pay for these premiums will quickly rack up a total bill that closes in on the book value of your vehicle (and you own the vehicle), you should probably drop these coverages.

If you purchase collision and comprehensive coverage, your last decision will be the size of your deductibles -- the per-accident, out-of-pocket expenses you pay before collision and comprehensive payments kick in. If you have a comfortable, liquid emergency fund, jack up these deductibles as high as you can stomach. You'll save money on both premiums and premium increases that might result from the small claims that come with a lower deductible. This is one place where self-insurance can save you big money.

Finally, some companies will try to sell you un/underinsured motorist coverage that covers your property (before we were talking about UM coverage for bodily injury). If you already have collision and comprehensive coverage, this additional first-party property insurance is probably superfluous. Collision and comprehensive will cover you regardless of fault. Unless there is a decent chance that an uninsured driver will plow into your house or other possessions, don't bother with this coverage.