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Auto Insurance Basics

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What exactly is car insurance?

Auto insurance is designed to protect you in the event that you injure others, including property damage and personal injury, as a result of an accident. In addition, depending on the coverage and plan you have, you will be reimbursed for injuries and damage to your vehicle. In its most basic form, auto insurance is a contract between you and your carrier. You agree to pay a fixed price, called premiums, in exchange for selected coverages.

The type of policy you have is described in detail on the declaration page, so make sure you always read it and understand exactly what coverage you have. It is always smart to read your policy carefully and make sure that you do not have overlapping matters, such as rental insurance. This is often covered by your credit card agreement, so you may just be wasting money using it. Remember you can always upgrade your insurance and cancel at any time.

What does car insurance cover?

This is a common question new customers always ask agents. The answer is that it depends on the plan and policy type you buy.

There are four main categories of protection.

* Liability insurance

This covers injuries to the other party, damage to their vehicle and also property damage. If you have a vehicle that isn’t worth much and you don’t drive too often, liability insurance can make sense. It’s much cheaper than comprehensive, with prices in some states starting at $29 for good drivers.

* Collision insurance

This will reimburse the damage and medical costs relating to you. It’s smart to buy it if your vehicle is newer and worth over $12,000.

* Comprehensive insurance

This is the gold standard of coverage. This type of policy costs more, but offers broad protection. It coincides with a collision and will repair or replace your car for events that cause damage or loss, unrelated to a vehicle accident. This means that if your car is stolen, you are protected and can have it replaced for its current market value. Weather-related damage to your car is also covered. Typical examples are floods, fires and animal incidents.

* Uninsured motorist insurance

More people are driving uninsured on the road than ever before. Buying uninsured motorist insurance protects you from these lawless drivers. If you are involved in an accident with someone who is not insured, you are covered up to your policy limit.

It is important to know that each state has different mandatory insurance policies and laws. You should familiarize yourself with the mandatory limits in your state and keep abreast of changing laws.

The most common car insurance policies

Each type of coverage you purchase includes a range of limits, policy terms, and multiple conditions. Physical injury is a very important.

It reimburses, as the name implies, physical injury incurred as a result of an incident that you have caused yourself. A good liability policy will also cover legal costs, up to certain predetermined limits, in the event that you are taken to court.

The liability also covers damage that you have caused to someone else’s property, almost always their car, after an accident has occurred. Medical insurance usually covers you and the passengers in your vehicle who are injured in an accident. Another benefit of good medical coverage is that it covers medical expenses in the event you are hit by a car that is walking as a pedestrian.

There are several states that have PIP or personal injury protection laws as opposed to medical coverage. Some people call this interference-free coverage. PIP insurance usually pays for medical expenses, funeral expenses, loss of income and a variety of other costs related to physical injuries sustained after a car accident.

What you need to know before taking out car insurance

The most important thing to consider when buying auto insurance is getting coverage that meets your needs. What are your specific needs, including your budget and risk tolerance. Remember to think of a worse scenario, such as buying enough coverage to replace your car and protecting the assets you’ve built up.

In general, the higher your personal wealth, the more insurance protection you need. Lawyers also target people who have a lot of money with solid lawsuits, claiming pain and suffering. Your insurance plan should track your capital growth and protect you fully.

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