Auto Insurance Basics

Auto Insurance Basics
By Marilyn Katz

At the most basic level, auto insurance is simply a contract between you (the first party) and your car insurance company (the second party). The third party to this contract has not come into the picture yet, because he or she is probably somebody you have not met yet. That would be the other guy or gal involved in a car accident.

Liability Insurance

No matter how carefully you drive, over your driving last, you will probably have an accident. Even a minor car accident can cause thousands of dollars worth of property damage. And again, no matter how carefully you drive, there is a good chance that you will have a car accident that is your fault.

This is where a liability insurance policy comes in. Your car insurance policy probably covers a certain amount of property and injury coverage. One covers damage to the other person's car, and the other one covers damage to the other person's body.

Almost every state requires a minimum amount of liability insurance. Even those states without such a law, require drivers to have a “proof” of financial responsibility when they operate a car. The most common type of proof consists of liability insurance. You pay the premiums, and your insurance company agrees to pay a certain amount of damages if you cause an accident.

Make sure that your liability insurance actually covers the assets you are protecting. If you have a lot of assets, the state minimums may not even be enough. Furthermore, if you use your car for your work or business, the state minimums probably will not be enough. In that case, you may want to look into commercial car insurance.

Now that you have protected yourself from the other claims by the other guy, also consider passengers in your car. If they are hurt, and the accident is judged to be your fault, they could make a claim against you. Be sure to consider the personal injury and medical payment coverage for yourself and people in your car!

Uninsured Motorist

The last basic insurance to consider is uninsured or under insured motorist protection. Even if you do not cause the accident, when the other driver does not have insurance, your odds of collecting for damages drop like a stone. You really want to rely on your own insurance company to pay your bills and attempt to collect for damages.

Collision and Comprehensive Insurance

Of course, collision insurance pays to repair your own car, and not the other guy's, in case you cause an accident. If you cannot afford to repair or replace your car, collision insurance is an affordable way to protect yourself! Many people tell you to consider the car's book value, but I would tell you to consider the replacement cost! If you cannot replace it, insure it. A collision policy should also pay for a rental car while your own vehicle is being replaced. That is a big convenience.

Comprehensive insurance covers damage or loss that is not covered by a car accident. Examples of comprehensive insurance include theft or storm damages. Make sure you understand your own coverage.
Now that you understand the basics of car insurance, be sure to check out our Car Insurance Guide.

Find the best deals on top insurance plans at http://www.247quoteus.com

Source: Marilyn Katz

Auto Insurance Basics