Car insurance is a bitter pill for many people. Regardless of our driving habits and experience, we must have insurance which is often expensive and the costs seems to slowly creep up over time. The best way to make sure you have only what is necessary is to understand what the types of insurance are and get only what you need.
There are three primary types of car insurance coverage: liability, collision and comprehensive. Depending on your circumstances and where you live, each one may or may not be necessary. Together they make up the vast majority of your car insurance bill.
The first type, liability coverage protects you if you are at fault in an accident. If you are determined to be at fault in an accident, you could be liable not only for damages to the other car, but for medical expenses, lost wages, as well as the pain and suffering of anyone injured. This insurance is mandatory for all drivers in most states. However to save money, you can lower the coverage amount. Be careful and don’t go too low since it could cost you dearly in a personal injury trial if you must pay out of pocket.
The next type of insurance is collision. Collision coverage pays for the repairs to your vehicle if it is damaged in an accident or for the replacement of its market value if it is damaged beyond repair – totaled – regardless of who is at fault. Generally if you are still financing your car or if your car is leased, you must have collision coverage. If your car is paid for, you can sometimes drop this coverage to save on your insurance bill. Since the laws from state to state vary, ask your insurance company and make sure this applies to your circumstances.
The last major type of car insurance is comprehensive. Comprehensive coverage pays for repairs to or the replacement of your car if it is stolen or damaged in a fire, flood or storm. Again, this insurance is optional for most drivers in most states if your car is paid off.
If you want to save money on your insurance, but like the security of collision and comprehensive coverage, consider raising the deductible. The deductible is the amount you will pay first before the insurance money kicks in. Since collision and comprehensive cover mostly extreme cases, raising the deductible to $1,000 or more could save you a substantial amount of money on your insurance, yet still provide coverage in the event of a catastrophe.
There are other types of coverage which make up the remainder of your bill such as uninsured/underinsured motorist coverage. This insurance is generally mandatory and well worth it if, like me, you ever get hit by someone with no insurance. Other types of coverage such as medical coverage, rental reimbursement and so on are generally add-ons which may or may not be necessary depending on your circumstances. If you need them they give you great peace of mind, if not, they are a great way to cut your costs.