So you own a car.
If you’ve spent a sizable amount of your hard-earned cash on it, you probably want to get that baby insured, as well.
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You may have heard the words premium and deductible tossed around. But how do you choose the best coverage? How well do you understand the different parts of auto insurance policies?
Well, let me help you out.
First, you need to know that of all the states, 47 will require that you have some form of auto insurance.
Here’s a quick rundown of the terms you’ll likely encounter.
- Policy – this is what you buy when you purchase the car insurance
- Liability – this pays for accidental bodily injury and property damages to others
- Collision – pays for the damage to the vehicle caused by collision with another object
- Comprehensive – pays for loss or damage to insured vehicle that didn’t happen in an auto accident
- Medical Coverage – covers medical expenses when caused by auto accident, regardless of fault
- PIP – Personal Injury Protection. Pays medical expenses for the insured driver for treatment due to a car accident, regardless of fault.
- Uninsured Motorist – pays your car’s damages when the accident is caused by a driver with no liability insurance
- Underinsured Motorist – same as uninsured motorist, only with insufficient liability insurance
- Rental Reimbursement – pays for rental car damage due to an auto accident
Now, before signing up for anything, you also need to know about:
- State Laws – 47 states require liability insurance. 15 states require PIP on top of that.
- The Kind of Car You Drive – Do you use rentals a lot? You might want to get rental reimbursement. Is it a brand new car? You may want to get extended warranty for parts and labour. Are you leasing? You may want to think about gap insurance.
- How Much to Spend – know your assets and what you can afford. You may want to get the whole shebang, but if you cannot pay your premiums, then it’s eventually useless to you.
- Other Insurance Exists – health insurance and homeowners insurance may pay for damages from auto accidents. Knowing what other insurance policies you have and what they cover may save you some cash.
There are a lot of things to consider before committing to an insurance policy. Educate yourself to make the best choice.