Car insurance: Why it is needed and what type to buy

Choosing the right car insurance for you is all about finding the best combination of price and coverage.

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Auto insurance protects your assets if you are in an accident. However, insurance is a complex product that can leave you with many questions. For example, how much should you spend on car insurance? What kind of coverage should you get?

The average driver spends about $1,000 a year on car insurance. You can spend more or less than this amount. Keep in mind that your state may require you to purchase certain mandatory coverages.

If you’re in the market for auto insurance, or just want to see what other options you have, it’s easy to get started. View rates, get a free quote and start saving money.

To make the most informed decision, it’s helpful to understand what types of coverage are available to you and why it’s important to have.

Common types of car insurance coverage

Choosing the right car insurance for you is all about finding the best combination of price and coverage. Ideally, you should aim for enough coverage to suit your needs at the lowest price.

Compare quotes from multiple insurance providers to determine the best price. Just make sure you use the same types of coverages, minimums, deductibles and other policy parameters when getting quotes so you can compare apples to apples.

Not sure what insurance coverage you need? There are countless options, and working with an agent to determine your needs is usually a smart idea. To help you get started, here are six top types of car insurance coverage to consider.

responsible

As its name implies, liability insurance pays for covered damages and injuries when you are responsible for an accident. As mentioned earlier, most states require you to carry auto liability coverage.

There are two types of liability coverage:

  1. Bodily Injury Liability (BI): If you cause an accident, bodily injury liability coverage can help cover the other party’s damages, including their medical bills, lost wages, and pain and suffering.
  2. Liability for property damage (PD): PD coverage can pay for damages you cause to another person’s property due to an accident.

HOLISTIC

The purpose of comprehensive auto insurance is to cover many types of losses that do not result from an automobile accident. For example, your comprehensive coverage may pay for damage to your vehicle from covered events, which typically include:

  • Theft
  • Vandalism
  • Greetings
  • fire
  • Falling trees or other objects
  • Hitting a deer

Generally, comprehensive coverage comes with a deductible (the amount you have to pay out of pocket before your insurance coverage kicks in).

If you would like to learn more about this particular type of coverage, contact an insurer today. They can provide information on costs, discounts, coverage and more.

crash

Unlike liability insurance, which covers damages to the other party, collision coverage can pay for damages to your vehicle. Whether you hit another vehicle or object, collision coverage can cover the costs to repair or replace your car after you pay your deductible.

Collision coverage is usually optional, but if you finance your vehicle, your lender or lessee may require you to carry it.

Uninsured/Underinsured Motorist (UMC)

UMC coverage is effectively a liability policy to protect yourself against drivers who drive uninsured or who do not have enough liability coverage to cover your medical expenses. In some states, your UMC coverage may also help pay for damages to your vehicle.

Depending on your state, uninsured and underinsured motorist coverage may be required or optional.

Medical Payments (MPC)

Medical payments coverage can help pay for medical treatment of injuries you or your passengers suffer from an accident. Covered treatments may include doctor visits, surgery, x-rays, ambulance transport, emergency medical technician and other services.

The medical payment has a limit per person, which means you will have to pay out-of-pocket expenses beyond your insurer’s limit.

Personal Injury Protection (PIP)

Just like medical payments coverage, personal insurance coverage can cover your medical costs from an accident. However, unlike MPC, personal injury protection can pay for lost wages, childcare or other expenses caused by your accident-related injuries.

Also known as PIP or no-fault insurance, personal injury protection can pay for medical expenses regardless of who is responsible for an accident. It even covers you if no other party is involved in an accident.

When you pay your auto insurance bill, it’s for a benefit you hope you never get. However, car insurance is a valuable and necessary tool to have if you drive a car, whether it’s to meet state law, your credit requirements, or your liability protection needs.

Reasons to have car insurance

If you are at fault in a car accident, how would you pay for specific losses such as damage to the other party’s vehicle or medical bills? How would you pay for your legal defense if the other party sues you for the accident?

Simply put, car insurance is necessary if you drive a car to help pay for covered losses and protect you legally and financially. Other reasons to buy auto insurance include:

  • It is the law: Almost all states mandate that drivers have property damage (PD) and bodily injury (BI) liability coverage, although the types and minimums of coverage can vary from state to state. Consequences for driving without insurance can include fines of up to $5,000, driver’s license and vehicle registration suspension, vehicle impoundment, imprisonment and other penalties.
  • Your lender or letting agent may require insurance: If you are renting your car, the lender or rental agent may require you to carry comprehensive and collision coverage to protect their investment.
  • Insurance protects you from the cost of repairs: Comprehensive or collision insurance can protect you from having to use your own money to pay for damage to your car. For example, if your car is stolen or damaged in bad weather, insurance can cover the costs to replace or repair your vehicle, so you don’t have to.
  • Insurance helps you when an uninsured driver causes an accident: According to the Insurance Information Institute, nearly 13% of drivers in America do not have auto insurance. Carrying uninsured motorist coverage can help you cover vehicle damage and medical bills that result from an accident caused by an uninsured driver.
  • Motor insurance can cover your passengers: Medical payments coverage and personal injury protection can help cover medical bills for you and passengers injured in an accident.

Have more questions? Or just want to get a new quote to compare with your existing policy? Contact an insurer today and start saving money.

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