The Basics of Auto Insurance Explained

Car insurance can be overwhelming, particularly if you are shopping for the first time. Having auto insurance explained to you can be difficult when you are relying on the insurance agent to tell you the ins and outs of the various options that are available. It is important to arm yourself with some basic information before setting out on your quest for the perfect insurance policy.

Most states require car owners to have basic liability insurance. This type of coverage protects you for damages done to others when you are responsible in an accident. Liability insurance will pay for any repairs to the other person’s vehicle if you are at fault. Liability auto insurance typically comes with coverage limits, beyond which the insurance company will not pay. State laws usually mandate minimum liability insurance limits. However, even though a higher limit will raise your premium, it is advisable to obtain coverage up to your net worth. Otherwise you are risking getting sued for damages the insurance company did not cover.

Most states also require basic bodily injury liability insurance. This type of coverage will pay for any medical bills or death that the other person may incur if you are responsible for the accident.

These are the bare minimums that are required in most states; however, you may want to cover yourself with some more insurance. A good choice is to obtain collision insurance. This type of coverage will protect your vehicle when you are at fault in an accident. Comprehensive insurance should pay for damages that are incurred in an accident where you are at fault.

When you have auto insurance explained to you, it is important to understand the deductible limit. A deductible is the amount that you pay out of pocket before the insurance goes in effect. For example, if your car suffers $1000 worth of damages, and you have a $250 deductive, the insurance company will only pay $750. The up side is that deductibles lower the cost of insurance premiums, and the higher your deductible, the lower your insurance premium payment. However, it is a good idea to set your deductible at an amount that you are comfortable paying out of pocket in case of an accident.

Listed above are the most common types of auto insurance. However, it is a good idea to discuss with your car insurance agent all of the different policies and do some research before determining what the best policy is for you.