Auto Insurance 101 - Get the Basics
Auto Insurance Basics
You’ve got the basics: the car of your dreams, your license to drive; now it’s time to hit the road. Not so fast. Before you ride off into the sunset you should familiarize yourself with some auto insurance basics – starting with the number one rule: In order to drive legally in the United States you need to be insured which means every driver needs car insurance if they don’t want to get slapped with a ticket – or a lawsuit. Find out the different types of auto insurance with this quick run-down on the basics.
Basic Liability Auto Insurance
In the US, all states require some portion of liability insurance so you should factor in insurance premiums when creating your driving budget. Liability insurance covers property damage and bodily injury and protects you from claims made to another person or their property in the event of a car accident. The upside to liability insurance is the premiums are affordable. Unfortunately liability insurance won’t cover any damage to you or your car. Less coverage is the price you pay for cheaper auto insurance premiums.
Collision & Comprehensive Auto Insurance
If you really did just buy the car of your dreams you may sleep more peacefully at night paying the extra cash for collision & comprehensive insurance. As the name implies, this type of auto insurance basically covers the cost of your car in case of an accident – which means you don’t have to worry about totaling your precious new car and then eating the losses. Frugal hint: Raise the deductible and pay a lower monthly payment – only if you can afford the deductible should the worst happen. Hailstorm, deer run-ins, unexpected fires. Comprehensive auto insurance covers accidents not due to other cars.
While this kind of auto insurance coverage is entirely up to you, be aware that if you are still financing a car, some banks will require collision and comprehensive or full coverage.
UM/UIM Auto Insurance Coverage
Some states allow for UM or Uninsured/Underinsured Insurance that will pay for any hospital costs in the case of a driving or pedestrian accident. In fact, some states even require drivers to have this type of insurance at the very least so look into your state's requirements. This type of insurance covers costs incurred by uninsured or underinsured motorists.
MedPay (MP)
Medical Payment insurance covers the cost of any medical or hospital damages in case of an automobile accident, no matter who is at fault. Check your state laws to find out how this basic car insurance may apply to you.
Getting Started Finding Car Insurance
When you’ve gone over your budget and your individual auto insurance needs, it’s time to start shopping around. Comparison shopping online is an excellent way to find the lowest premiums for the most coverage you will need. Be sure to compare plans using the same deductibles and monthly payments so you can accurately discern the better deal. By following just a few basic steps, you can be on your way to being a safe, resonsible driver.