A guide to select an auto insurance policy

What is Auto Insurance?

When you get an auto insurance policy, the insurance company agrees to cover some or all of the cost of your car is damaged, if you damage another person's car or if your car is stolen. Exactly what costs will be covered by your insurance policy depends on the type of coverage that you decide to get. You can learn more about the different types of coverage in the next section. In exchange for the insurance companies financial protection, you pay a premium each month (or once every six months.)

In the rest of this article, we are going to go over exactly what you need to know before getting your own car insurance policy. In addition to going over the different types of coverage, we are going to talk about what is not covered by auto insurance, what factors can influence your rate, and what you should do before picking your car insurance policy.

What Are The Different Types of Coverage?

There are six main types of insurance coverage: liability, collision, comprehensive, uninsured motorist, underinsured motorist, and personal injury protection. 

Liability Insurance Coverage 

If you get a liability coverage policy, the company will pay for damage and injuries in an accident where you are at fault. Keep in mind that this covers only the other vehicles' damages and the injuries of the people in the other vehicle. It does not cover the costs for the passengers in your car

Keep in mind that no matter how careful of a driver you are, in most accidents, you will be considered at least partly at fault because of something called “comparative negligence.” Without liability coverage, if you get in an accident, you may end up being at least partly responsible for paying medical bills and repair costs for other people in addition to for yourself. 

Collision Insurance Coverage

Collision coverage is a completely optional type of coverage, and it tends to be more expensive than liability insurance; however, there are several different types of benefits that come with it. Collision insurance will have you covered any time that you get in an accident. If you have collision insurance, it will cover any damages to your car, whether the accident was the other person's fault or yours. 

However, it is important to keep in mind that if the accident is the other person's fault, your policy will only pay you for what the other person's coverage will not. This means you cannot get paid twice for the same damages. 

Comprehensive Insurance Coverage 

Comprehensive insurance coverage is the policy that you get if you want coverage for everything else. Liability and collision policies provide coverage for accidents, but comprehensive policies provide coverage for other problems you could run into. This typically includes things such as theft and vandalism, window and windshield difference, animal damage, storms and natural disasters, and falling objects. Most policies will only cover you for these damages after you pay a deductible. 

Uninsured/Underinsured Motorist Insurance Coverage

Uninsured and underinsured motorist insurance are both very similar policies. Uninsured motorist insurance policies cover you if the person that you get into an accident with does not have an insurance policy. Even if the accident was the other person's fault, this type of insurance means your insurance company will step in and cover any damages and usually medical bills for you and your passengers. 

Underinsured motorists policies are similar, only they cover you when the other person does have insurance, but their coverage does not pay for all of the damages or injuries that you suffer. Under this policy, your insurance company will step in and pay the difference. 

Personal Injury Protection Insurance Coverage

The final type of auto insurance policy that you can get is Personal Injury Protection or PIP. PIP insurance covers additional medical expenses no matter whose fault the accident was. This type of insurance coverage also often includes things like service replacement, lost wages, funeral costs, and rehabilitation costs. This type of insurance is required by 12 different states and Washington D.C. 

What Is Not Covered By Auto Insurance? 

Even the best and most comprehensive auto insurance policies probably will not cover you in every situation. You should always read your policy carefully, so you are aware of exactly what you are covered before, but let's talk about a few of the different things that you are likely not protected for under most basic policies. 

First, you are most likely not covered for any damages that are caused while someone else is driving your car (though their insurance might be able to cover them for the damages.) Second, most basic policies will not cover any exotic or vintage cars, so you will need to get some sort of separate or special policy if you have one. You also will likely not be covered for routine maintenance or repairs. 

You should also keep in mind that most insurance policies, especially liability insurance policies, usually have some sort of cap on how much they are willing to pay. If the damages to the other person's vehicles or their medical bills exceed that amount, you may be responsible for making up the differences personally. 

Finally, if you are regularly driving a car that is not your own, you might want to consider getting a non-owner insurance policy. This will cover you for any injuries or damages that you are responsible for if you get into an accident driving someone else's car

What Factors Can Influence Your Rate?

Even if you and someone that you know both apply for the exact same insurance policy, it is more than likely that you will end up paying different rates. This is because your insurance rate is affected by a number of different factors, including your age, the age of your car, where you live, your credit score, your driving history, your gender, how much you drive, your marital status, any extra safety features your car has, and the type of car you drive. 

When you take all of these different factors, it makes sense that people's car insurance can vary a lot from person to person. In the United States, the average cost is $1,555, but your own policy could be vastly different from that price point. 

Photo by Reynier Carl

Is It A Requirement For You To Have Auto Insurance? 

In 48 out of 50 states, it is a requirement for you to have at least some sort of auto insurance policy. The two states where it is not an absolute requirement are Virginia and New Hamshire. In Virginia, you can opt-out of all forms of car insurance as long as you pay a $500 annual fee, which is less than even most basic policies. However, even after you pay this fee, you are responsible for paying for any damages if you get in an accident. 

In New Hamshire, they strongly urge everyone to get at least a basic insurance policy. However, there are multiple reasons why you might have to get auto insurance even if you live in New Hamshire. For instance, if you have a DUI, have been found at fault previously without insurance, have had a suspended license, etc. 

However, even if you do live in one of the states where auto insurance is not required, it is always a good idea to get at least a basic policy to make sure that you, your passengers, and your vehicle is at least somewhat protected. 

What Should You Do When Looking For A Policy? 

First, you should consider how much coverage do you want. This depends on how much money you are willing to pay per month, how much you can cover if you do end up in an accident, and how much insurance you are required to have where you live. 

Once you know how much insurance coverage you are looking for, you can start shopping around for insurance policies. It is never a good idea to just get the first policy that you look at. Spend some time comparing the different policies offered by different insurance companies. You may also want to spend some time talking to people who are covered under policies that you are considering using to see what their experience has been. 

How To Save Money When Purchasing Auto Insurance? 

There are a few things that you can do to help save yourself money when buying car insurance. First, it can be a really great deal to bundle your insurance. This means you will get your auto insurance, homeowners insurance, life insurance, etc., all under one policy. Usually, this will come out cheaper than if you got each policy separately. You should also ask the insurance company about other discounts that they may offer. For instance, some companies will give you discounts for certain safety features, if you are a student or have a certain job, or if you can prove that you are a safe driver. 

In conclusion, if you own or drive a car, it is important that you have some form of auto insurance. While you might not feel like you need it right now, if you wait until you are in an accident and really need it, it will be too late. Remember, consider what type of coverage you want, shop around for the best policy, and ask about what kinds of bundles and discounts they offer. 

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