Essential Information

Before you buy a car, you invest a large amount of time deciding which car is best for you based on your budget and driving needs. The same process should go into choosing auto insurance, being careful about what you truly need in your policy and being cautious about the costs. Here are six categories of a standard auto insurance policy that you will find integral to your own policy.

Bodily Injury Liability:

This type of coverage protects you if you are at fault for an accident that resulted in an injury or death of anyone involved in the accident. Always check for state regulations, as many laws differ in each state. If you have a split policy coverage for your liability

Liability:

1. The liability clause in your policy protects you if there is an accident that is your fault, and which results in an injury to someone else and/or damage to property. Since every state in the country has its own liability rules, make sure you know what your state requires.
2. Example--if your policy includes a liability limit of $100,000/$300,000, the break-up is as follows:
1. The car insurance company will pay up to $100,000 towards any one person's medical expenses.
2. $300,000 is the limit for all medical expenses for everyone in the accident.
3. Liability coverage does not cover injuries or damages to your own vehicle.

Property Damage:

1. This is the total amount your car insurance policy will pay for any property damaged that is deemed your fault.
2. Most car insurance policies have a property damage limit of $100,000, which you may increase for a price.

Comprehensive:

1. This form of insurance coverage is the one that pays for damages to your car that happen for reasons other than a collision, including theft, storm damage, fire and vandalism.
2. This coverage will have a deductible attached, and the rate of the car insurance coverage goes down as the deductible goes up.
3. This insurance coverage will be required on any loan you may have on the vehicle.

Collision:

1. This pays for damages done to your own car in the event that the accident is your fault.
2. If your vehicle is totaled in an accident, the car insurance company will pay the actual cash value of the vehicle.
3. However, the cash value amount of the vehicle may not equal what you may still owe on your car loan. If you are purchasing a new car, you'll want to ask your agent about GAP insurance that does provide you with this added coverage.
4. As with comprehensive coverage, collision coverage is also required by finance companies on any car loan.

Uninsured/ Underinsured Motorist:

1. Uninsured and underinsured motorist coverage compensates you in the event of an accident that is not your fault and when the other party has either no insurance or not enough insurance.
2. Statistics show that there are thousands of drivers who do not have car insurance, so it's smart to protect yourself with this type of coverage.

Whether you've had your auto insurance coverage for some time or you're planning to buy a new or used car, it's important to understand the basics of car insurance so you can have peace of mind on the road.