Getting car insurance coverage is one of those things that does not sound complicated until you try to make sense of it all. While it is good to have options, sometimes having so many choices can feel confusing and even overwhelming. However, having a better understanding of your choices will help you make the best choice possible.
The important thing is to always make sure you have at least the minimum your state requires. There are other circumstances where you must have a certain type or amount of auto insurance, such as with a car loan. Otherwise the choice is mainly up to you, so make sure you have the information you need to make the best decision possible.
∑ Liability Insurance -- Liability is the bare-bones, most basic auto insurance coverage you can get and the minimum that most states require. If you are the at fault driver in an accident, liability coverage is what takes care of the majority of expenses caused for the other driver. This is broken down by three numbers, such as 10/20/15 for example. (State by state requirements)
o This would mean that, for your particular state, you must carry a minimum of $10,000 for bodily injury per person per accident, $20,000 for bodily injury total for two or more persons per accident and $15,000 for property damage per accident. Any costs above this cap are still your responsibility to cover out of pocket. The downside is that liability does not cover any of your own expenses. This is only a good option for someone with a car that is of little value, who has health insurance and is on a tight budget.
∑ Collision Insurance -- If you are looking for more than just liability insurance, collision coverage is a good option. This type of insurance covers your expenses up to a certain amount.
o This also means if your car is totaled you will be able to recoup at least the value of the car. The only time this may not be a good choice is if you are driving an older car that would probably not be valued high enough to make it worth carrying the extra coverage.
∑ Comprehensive Insurance -- It seems like collision insurance would be enough to keep you and your car protected, but this still does not cover everything you may need. Comprehensive insurance helps take care of things collision and liability insurance does not cover.
o In other words, if something happens besides a car accident, comprehensive insurance takes care of that. Some things that can be covered include theft, vandalism, storm damage and animal collision.
∑ Non Owners Insurance -- Like the name implies, non owner insurance is for drivers who do not own a vehicle. The reasons for having this type of insurance would be mainly to prevent having a lapse in your insurance coverage history and to protect yourself in the event of borrowing or renting a car. You can find out more about it here.
o This is a very basic type of liability insurance coverage, but it is good for times when you need some sort of coverage.
∑ PIP or No Fault -- Some states require PIP or no fault insurance. No fault insurance means that both drivers own insurance covers their expenses, no matter who is deemed the at fault driver. PIP stands for Personal Injury Protection and is meant to cover medical expenses for the driver carrying the policy.
o The general idea is that everyone has coverage for their own accident related expenses in order to prevent someone lacking coverage, someone not getting the medical care they need and the need for lawsuits.
∑ GAP Insurance -- GAP insurance is usually most important for anyone who has a car loan. The bad news is that not everyone who needs it has it, and this can end up being a very costly mistake. If you own a car that you are still paying for and total it, your insurance will cover the value of the car.
o That means whatever the remaining balance is between the value and what is still owed is still yours to pay for out of pocket. Not only will you be out of a operational vehicle, but you will be making payments on a car you no longer have. GAP insurance covers this difference so you are fully protected.
∑ SR22 Insurance -- The majority of drivers who would need SR22 insurance know they need this. SR22 coverage is usually for drivers who are considered high risk, have lost their license and driving privileges or have been convicted of criminal behavior such as DUI or DWI (state laws). A good place to get it is here.
o The SR22 is actually a form that the insurance company fills out in order to show the state that the driver applicant has obtained auto insurance. The SR22 is also referred to as a Certificate of Financial Responsibility.
∑ Short Term Insurance -- Another option that is becoming more popular is short term insurance. This basic coverage ensures that you donít have any gaps in your insurance history while you are looking for long term coverage.
o Short term insurance helps you have insurance protection while you are comparing rates for more long term coverage.
∑ Uninsured Motorist -- If everyone who is supposed to have car insurance had coverage, there would be no need for uninsured motorist coverage. Because that is not the case, it is a good idea to have this type of insurance.
o Uninsured motorist helps protect you in instances when you are in an accident with someone who lacks insurance or who is under insured. This is important to have because even if you are not the driver at fault, accident-related expenses could be yours to cover out of pocket.
When you sign up for insurance you rarely have just one type unless you are settling for just the basic liability coverage. In most cases, you are combining several different types of insurance coverage into one policy. Understanding what each one protects you against is the key to making the best decisions. Do not get caught driving without some type of insurance and avoid having lapses in your coverage in order to avoid any problems.