A car is a significant investment and a necessary part of daily life for most people. Vehicle insurance, offered by third-party insurance companies, can protect that investment and cover you in case of an emergency. But how do you know which car insurance company to choose, or which coverage is right for your vehicle? Use this simple guide to find out why vehicle insurance is important, which options are available and how to choose a provider.
Why do I need car insurance?
Most states (49 out of 50, plus Washington, D.C.) have laws that require minimal vehicle insurance coverage. So, at the very least, you must buy car insurance to ensure compliance with your state’s laws and regulations. Also remember that vehicle insurance provides benefits beyond helping you avoid a traffic citation. Damage to your vehicle resulting from an accident can cost thousands of dollars to repair, and in some cases your vehicle may not be reparable at all. Car insurance is designed to help you avoid sudden, large payments for the repair of your vehicle or other vehicles involved in an accident. For a low monthly fee, insurance companies will cover the cost of damage that results from an accident (minus your deductible), so you can avoid a huge, unexpected out-of-pocket expense.
What are the types of vehicle insurance?
There are seven primary types of car insurance. Each serves a specific purpose, but it’s unlikely that you’ll need all seven.
- Liability insurance – This is the type of insurance coverage most commonly required by state law. Liability insurance covers damage to other cars, buildings or property during an accident, as well as medical bills that may result from injuries. Liability insurance usually has an upper limit of coverage, and may not cover your car in the event that you were at fault in an accident. Liability insurance is typically supplemented with other coverage plans, such as collision insurance.
- Collision insurance – Collision plans will cover the cost of your car repairs if you’re in an accident. This type of insurance is usually required by banks or lending agencies when you take out an auto loan or lease a car.
- Comprehensive insurance – Collision and liability insurance cover damage to your car as the result of an accident. Comprehensive insurance coverage is helpful if your car is stolen, broken into, damaged by the weather or in a collision with an animal.
- Uninsured motorist protection – If a motorist is uninsured or underinsured (i.e., his or her vehicle insurance does not cover the total cost of your repairs), uninsured motorist protection can help cover the difference between the full cost of repairs and the money contributed by the fault party.
- Medical/personal injury protection – This coverage will cover medical expenses regardless of which party is at fault. A good health insurance plan is usually preferable to personal injury protection, but be sure to evaluate cost and coverage before making a decision.
- No–fault insurance – No-fault insurance is currently available in 12 states, and covers damage to your car whether or not you are at fault. This alternate insurance model can be more expensive, and should be considered only in some states.
- Gap insurance – If you’re still making payments on your vehicle, this coverage can help protect your investment. If your vehicle is totaled, gap insurance covers the difference between the vehicle’s value (as determined by your insurance appraiser) and the amount you still owe to the bank or lender.
How do I choose an insurance provider?
The most important step in finding a vehicle insurance company is to shop around. Be sure to get quotes from multiple providers, and ask questions about coverages and costs so your needs are met. Online ratings and reviews are a great place to begin your search for car insurance company information. By doing your homework, you can be confident in your decision in picking the right insurance coverage.