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Automobile Insurance Coverage

By Edited May 25, 2015 0 0

If you already have a car or truck, you probably already know at the least the basics about automobile insurance coverage. You know about premiums and deductibles. But, do you really know about the details of your policy and if you have the right coverage?

Forty-eight states require that you have some type of car insurance (Wisconsin and New Hampshire don’t require any auto insurance), so it is important that you know about all the various types of coverage and options so that you can be protected at the best level for your budget.

Before you buy automobile insurance coverage think about how much you want to pay as that will impact what type of coverage you are able to get. Next, you will want to find out what coverage is required in the state you live in as it can vary.

When you purchase insurance you are buying what is called an insurance policy, which is actually a collection of different types of insurance coverage bundled together. This bundle, is usually a mix of some or all of the following.

Types of Coverage

Liability This is the basic coverage that is required by most states. This insurance pays for injuries and property damage to others (does not include your vehicle) that you cause. The minimum level of coverage required varies by state, but you can always buy more than is required.

Collision Collision covers damage to your vehicle that is caused as the result of a collision with another car or an object.

Comprehensive This covers any damage to your automobile other than a collision. This could include damage as a result of a break in or damage from a flood or fire.

Medical This insurance pays for medical expenses regardless of who was at fault. This is could be some overlap here with Liability, except that Liability only covers expenses that are your fault.

PIP (Personal Injury Protection) This coverage is also required in certain states. PIP pays healthcare for an injured driver, no matter who is at fault.

Uninsured/Underinsured Motorist Pays for damage to your car if it was caused by someone else who either has no insurance or doesn’t have enough to cover the damage.

Rental Reimbursement This automobile insurance coverage will help pay for the cost of a rental car if your insured vehicle needs repairs due to an accident.

How Much Will it Cost?

Once you’ve got a handle on the types of automobile insurance coverage, it is time to think about price. The price of your coverage is impacted by several things—though all other things being equal, price will still vary across different insurance companies, so you should always seek a quote from several sources.

The first thing that impacts the price is the kind of car you drive. A car that is more likely to cost the insurance company money is going to make your automobile insurance coverage more expensive. Sports cars for example are more likely to get in accidents, making the cost to insure them more expensive.

In addition to the car you drive, your age, race sex, and driving history will also impact the price. This is known as profiling. If you fall within a group of people that is more likely to cause an accident or be in an accident your insurance rates will be higher. Young, unmarried males are statistically in more accidents and thus their insurance rates are higher.

The next component that impacts your automobile insurance coverage pricing is the deductible. The deductible is piece of your car insurance that you’re responsible for paying in the event there is damage to your car or you are in an accident. For example, assume you have a $500 deductible and that you are in an accident that requires $3,000 in repairs to your car. You would pay $500, and the insurance company would pay the remaining $2,500. When your deductible is higher, the financial risk for the insurance company is lower and thus your insurance cost will be lower.

Buying automotive coverage doesn’t have to be complicated or confusing. By understanding what your state requirements are, learning the various parts of an insurance policy and knowing how much you can afford, you are well on your way to getting the policy for you.

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