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Home » Consumer Information » Automobile Tips » Insurance Tips

Choosing an Insurance Policy

Many of us don't remember, but at one time it was considered a luxury if someone owned an automobile. However, in most areas of the country people need cars to live normal lives. As a result, the number of cars on the road and the accidents they are involved in has increased exponentially. Reports of vandalism have also risen proportionately. These are the primary reasons why auto insurance has become a necessity.

Types of policies

There is such a wide array of coverage on the market nowadays that is suitable for people of just about any economic status. Ultimately, the policy level that consumers choose is contingent upon their annual income. The law mandates that drivers must have a bare minimum of basic insurance coverage in order to legally put their vehicle on the road. The more comprehensive the coverage, the higher the monthly premiums will be. But, with better coverage comes a higher degree of protection against potential mishaps.

Liability coverage

If you are responsible for causing an auto accident in which the other vehicle was damaged and the person(s) in it sustained injuries, liability insurance will compensate the other party for the resulting costs. Legal fees are usually paid for as well, but you should verify this when settling on a policy. Liability coverage provides collision compensation for your vehicle if it is necessary after the crash. You will typically have to pay a deductible (e.g., $250 or $500) to receive a check.

Comprehensive coverage

Although it is more expensive, comprehensive insurance offers coverage for more than just damage or injuries resulting from a collision with another car or object. Other circumstances like theft, vandalism, natural disasters, and fire are fair game too. Comprehensive coverage also requires a deductible, and the higher the deductible, the lower your monthly bill will be. If your vehicle is financed, it may be mandatory to take out a policy comprised of comprehensive coverage.

More types of coverage

For an additional fee, there are more categories of coverage to amend you policy such as:

  • Personal injury protection -- covers medical costs regardless of who is to blame
  • Uninsured motorist coverage -- pays for property damage and your injuries in the event the other driver does not have liability coverage.
  • Reimbursement coverage -- pays you back for the cost of a rental car while your damaged vehicle is off the road and being repaired.

Other elements to think about

There are a few things to consider when choosing the auto insurance policy that is right for you. Aside from your budget, you will want to factor in the year and condition of your vehicle; it wouldn't make sense to pay a high premium if that yearly rate is greater than the vehicle's worth. Think about how much time you spend driving as well. If you are on the road more than the average person, the odds that you will be involved in an accident increase. If you use the same vehicle for personal use and for work, inquire about commercial insurance coverage.