The first and most basic kind of car insurance is liability. This type of car insurance is required by most states. Liability insurance will protect you financially against costs you might incur as a result of damages or injuries you might cause to others in an accident.
Liability insurance comes in two different breeds: bodily injury liability and property damage liability. These set limits on the amount for which you and the insurance company will be responsible in the event of an accident.
You may see liability insurance generally divided into three numbers, like 25/50/20. This means your insurance will pay $25,000 in bodily injury damages to one person, $50,000 overall to everyone, and $20,000 in property damages in the event of an accident.
State laws vary on the amount of liability you are required to carry on your insurance. Check with your state or online to find the minimum liability requirements for car insurance. Remember, it is always safer to go with a little more liability coverage, especially if you have assets which could be taken if you cannot cover extreme costs in the event of an accident that goes over your liability coverage amounts.
You may also decide to get medical payments insurance. This will cover immediate medical treatment needed for you and the people in your vehicle if you are in an accident, no matter who is at fault. This type of insurance can keep you from outrageous medical bills in the event of serious injury.
Personal injury protection is a type of insurance that offers even more coverage than medical payments insurance. It can offer coverage for lost wages, funeral costs and even pain and suffering for catastrophic accidents.
Some states require insurance which includes uninsured or underinsured motorist protection, and some drivers prefer to have the added protection which comes from this car insurance. Uninsured car insurance will cover you if the other driver does not have liability insurance. Underinsured insurance will cover the cost of your injuries if they cost more than other driver’s liability insurance will cover.
If you are still paying off a loan on your vehicle or if it is leased, you may be required to carry collision or comprehensive coverage. If you are a safe driver, drive an older car or have your car paid off, you may choose to forego collision or comprehensive car insurance.
Collision insurance will pay you up to the fair market value of your vehicle when you are at fault in an accident. You also may choose to carry this insurance if you do not want to risk losing money on your vehicle in the chance you have an accident.
Comprehensive insurance will cover damage by an unknown party or natural disaster. If your car is vandalized, a victim of a hit-and-run, in a flood, in a fire, stolen, etc., your comprehensive insurance coverage will pay up to the fair market value of your vehicle.
With both collision and comprehensive insurance, you may need to invest in gap insurance as well. This will protect the “gap” or difference between the fair market value of the vehicle and the amount you owe on the loan or lease.
As with any insurance policy, shop around for the best deals and look for ways you can save money for your situation. Depending on your car, your state and the way you drive, you may require extra coverage and higher rates, or you may be blessed with discounts and breaks. Ask questions and look for opportunities to save on car insurance premiums.
D. Blair Thompson
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