How Car Insurance Works - The Basics

 

There it is, sitting on the car lot, the perfect car that you have always dreamed of. When you purchase a car, you know it will cost you a certain amount of money, but you must not forget to also figure in the cost of car insurance. Different cars will actually cost different amounts for insurance. Part of this is dependent on how expensive the automobile was in the first place, but other things such as the availability of foreign parts or the cost of repairs of specialty cars are also figured into the overall cost. Sometimes, you will find that some insurance agents try to get you to purchase more coverage than your car really requires, so it is a good idea to know what they are talking about so you can make better decisions on the type and amount of car insurance you select.

Almost every state requires car owners to carry liability insurance. Liability is coverage for costs that are incurred by the other party because of an accident that you were the primary cause of. Liability covers both personal property, such as the repairs to their car, and bodily injury, if the other person was injured in the accident and requires medical attention. Many states have lower limits, so you will want to know what those limits are before you decide on a number with your insurance agent.

Some states require medical payments car insurance that covers all of the people who are physically in your car for costs related to bodily injury whether you or the other party are at fault. Some states require Personal Injury Protection (PIP) or no-fault insurance so that you are covered for medical costs and even things like lost wages and even funeral costs.

Additionally, some states require uninsured motorist and underinsured motorist coverage. These types of insurance cover you in case the other driver does not have insurance or doesn't have adequate insurance to actually cover all of the costs of the accident. Nearly all states require the uninsured motorist coverage, while many include underinsured motorist coverage as well, but some don't require either.

Comprehensive coverage is not required by the states, but if you have a bank loan for the car, they require you to carry this type of car insurance. This can even cover the cost of a windshield replacement and items like that. Collision insurance is for damage to your vehicle, and bank loans also require you to have this coverage.

With all of the options and different requirements for each state, it is helpful to ask questions about what is actually required and what is optional. This will help you know if you are getting cheap car insurance or if you are paying for more than you bargained for. Remember that there are ways to lower that premium. For instance, a clean driving record, taking defensive driving courses, having multiple cars on the policy, or having a homeowner's policy with the same company are all ways to bring the cost of your insurance premium down. By knowing what you are getting, you have more control over your car insurance and will know exactly what you are paying for.

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