Car Insurance Basic

Most people only think that insurance is something they need so they can get their registration and tag so they can drive. It is something that they need because their license will be suspended if they don't get it. It's just a bother to some because people think "I don't get into accidents, I am a careful driver."

Often times people will call for insurance and say give me the cheapest insurance or give me only what is required. Many people don't even know what this insurance coverage this is. A lot of people only really become aware of what coverage they have when they need it, like when they need to make a claim.

When you run into that stopped car or have someone sideswipe your car in a parking lot while you are shopping, suddenly having only the coverage is required by law may not be the best thing to have. You should always have as much insurance as you can afford to carry. Having too little is never good and if you have insurance you cannot afford is not any better. A policy that is cancelled due to non-payment does you no good at all.

Basic auto insurance policies are made up of a combination of the six types of coverage:

1. Collision: Covers the physical damage done to your vehicle as the result of an accident. This covers your property in accidents in which you are at fault, like a single car accident or collision with a stationary object.

2. Comprehensive: This covers repairs or replacement of your vehicle from damage caused by "non collision events", such as damages resulting from fire, theft, vandalism, and most acts of God.

3. Liability - Bodily injury: This covers injury or death caused by a vehicle driven by you or someone covered as a driver under your policy. This coverage pays for both the claim against you and the cost of your legal defense. If you are found to be liable for a higher amount than the policy you bought, you will have to pay the difference. In such a litigious society, it seems sensible to purchase the highest level of coverage that you can get your hands on.

4. Liability - Property damage: This covers damage caused to another persons vehicle or property. This is not limited to damage done to anothers vehicle. If you drive through someones yard and demolish their garden shed, it would be covered by Property Damage Liability, up to the limit of your liability.

5. Medical payments or Personal Injury Protection (PIP): Covers you, the members of your household and your passengers for medical expenses resulting from an automobile accident, regardless of who is at fault. Usually limited to $5,000 - $10,000 in most policies.

6. Uninsured motorist: Bodily injury: Protects you and occupants of a covered vehicle in an accident in which the owner or operator of a motor vehicle who is legally liable does not have insurance. Property damage: This coverage pays you for damage to your covered vehicle in an accident in which the operator of a motor vehicle who is legally liable does not have insurance.

The best car insurance advice we can give you is to pay close attention to the combination of policies you carry. That's more important than any single auto insurance coverage.

Basic liability coverage
This is the single most important type of auto insurance coverage. Carrying too little auto accident liability can expose you to judgments and legal costs for years to come.

Most states require something like 50/100/25 in liability coverage. That's up to $50,000 coverage for any single person injured by you in an auto accident, and up to $100,000 for everyone injured. Not a lot of money for medical bills, lost wages, and compensation for pain and suffering.

You should probably carry more.

Additional auto insurance coverage (anything you get over the minimum) gets cheaper as you buy more. This means that your premium goes up a little while your protection goes up a lot.

Pay special attention to bodily injury liability. It's easy to imagine the cost of personal injuries (plus pain and suffering and lost wages) totaling a million dollars from a somewhat serious accident.

The standard (the average, not the minimum) auto liability policy is 100/300, where the 300 stands for $300,000 in total bodily injury liability. But we would recommend that you take out at least $300,000-$500,000 worth of personal injury liability, even if that means less property damage coverage.

Why? Because property damage from an accident won't be nearly as expensive as injuries can be. So the $25,000 worth of property damage liability coverage in our example policy is probably adequate. (Of course, you can be on the safe side with a little more.)