Auto Insurance Basics

If you drive a car, you need auto insurance. Auto insurance is required by almost every state in the US. The few states that don't require car insurance require some type of proof of financial responsibility.

So lets get down to the basics of auto insurance. Car insurance protects you against a financial loss. It will provide a financial payment if you cause an injury or damage someone elses's property. Some types of coverage will even pay for damage to your car, even if you are at fault. So what are the main types of coverage you can buy with your auto insurance policy?

Types of Auto Insurance

Bodily injury liability insurance pays when you cause an injury to someone else. In other words, if you cause an accident, and someone is hurt, your bodily injury liability insurance will pay their medical bills.

Property damage liability insurance pays when you cause damage to someone else's property. Usually it will be another car, but it could be a tree, a fence post, or even a house.

Collision insurance covers damage to your car if you are in a collision, hit a pot hole, or flip your car. Collision insurance is not required by law, but may be required by your lender if you have an auto loan. Usually collision insurance comes with a deductible. The higher your deductible, the lower your premiums.

Comprehensive insurance covers damage to your car caused by just about everything, except collisions. Theft, hailstorm, flood or earthquake. You are reimbursed for damage to your car.

Medical Coverage covers injuries to yourself, or the passengers in your car. Sometimes it is known as Personal Injury Protection.

Uninsured Motorist pays when you are hit by a driver who does not have sufficient insurance. This could be someone who is carrying just the minimum amount of insurance, or it could be a hit and run driver.

Choosing an Auto Insurance Company

There are a number of factors to consider when choosing an auto insurance company. Price is certainly an important consideration, but you don't want it to be your only consideration. You need to know that when you have to file a claim, your insurance company will be able to settle your claim quickly and professionally.

You don't need to buy your auto insurance from one of the big names, but you do need to make sure the company you buy from will be around when you need them. Make sure the company you choose is licensed in your state. Check their claims process. How hard will it be for you to submit a claim? How are you treated by the company and staff? If you have an accident you are going to be stressed, you need a company you can feel comfortable with.

Saving Money on Auto Insurance

Prices on auto insurance can vary widely from company to company, so make sure you get a quote from at least 3 different companies.

It goes without saying that being a safe driver also helps keep your premiums low. If you do get a ticket, seriously consider going to traffic school to get it removed from your record. It will save you money in the long run.

You can also save money be taking a higher deductible on your collision and comprehensive coverage. The more risk you are willing to take on yourself, the less you will have to pay.

Consider dropping collision and comprehensive on older cars. If your car is totaled, the insurance company will only pay you the fair market value of your car. An older car may not be worth enough to justify the premiums.

Finally, keep your credit in good standing. Insurance companies found that people with lower credit scores had more claims, so the lower your credit score, the more you will pay for auto insurance.