If you own an automobile, you most likely know something about auto insurance, but there’s a lot to consider when deciding what type of auto insurance to purchase for your car. Understanding the basics of auto insurance will help you make the choice that best suits your needs.

An auto insurance policy offers a variety of types of coverage. This includes the following:

Liability provides coverage for any bodily injury and property damage to others for which the insured is determined responsible. Generally, liability coverage also extends to any rental car.

Collision covers any damage to the policy holder’s own vehicle in any type of collision. Collision pays for the repair of the vehicle, or for the cash value of the vehicle if it is deemed “totaled.”

Comprehensive coverage pays for any loss or damage to the vehicle from an incident other than collision. This includes, but is not limited to, theft, fire, weather, and impact with an animal.

Loan/lease payoff, or GAP, coverage is designed to provide protection during the time shortly after purchase/lease, when the car’s value has sharply depreciated, and there is a gap between the actual value of the vehicle and the amount owed.

Loss of use, or rental reimbursement, covers the cost of a rental car to replace the insured car while it is being repaired after it is damaged in an accident.

Medical coverage pays any medical expenses (regardless of fault) incurred in an auto accident.

PIP, or Personal injury protection pays any medical expenses (regardless of fault) for the insured driver for treatment due to an automobile accident. It at times also covers lost wages and other damages and is required in some states. It is sometimes deemed “no-fault” coverage because premium costs should not increase due to filing a PIP claim.

Uninsured motorist coverage pays for any damage to the car caused by a motorist without liability insurance.

Under-insured motorist coverage pays for any damage to the car caused by a motorist with insufficient liability insurance.

Most states require auto insurance, but the amount required varies from state to state. It’s a good idea to know what is required in your state, as well as what optional coverage is worth considering. Each state’s requirement is stated in terms of bodily injury liability limits and property damage liability limits, and anything beyond this is optional.

There are many factors to consider when determining what coverage suits your needs. For instance, consider your vehicle and how much would it cost to replace or repair it. Whether or not to opt for collision or comprehensive is based on the value of the vehicle. Don’t forget that other types of insurance, such as health and home owner’s, may cover the damages caused by an automobile accident.

In short, determining the amount of auto insurance, like any type of insurance, to purchase is about how much the policy holder is willing to pay out of pocket compared to how much they wish the insurance company to cover.

By: Quin Bailey Rodger

About the Author:

Sunkist Patel asked:


I have 150 employee overseas who can make outbound calls, take application, close the deal. I need a Insurance partner here in the US who can write the policy, take picture etc.

cait_babyblues asked:


I got in a minor accident and was issued a check from my insurance co. My family is really short on cash right now and we were thinking the best thing to do is leave the damage on the vehicle and spend the money on food. Is this possible? I understand I need my lienholder (which is my bank) to sign off on it too … How would someone get them to do that?

Nicoco asked:


I just bought a car, and didn’t have any before.
Before I drive it, I want to make sure I’m insured.
But I need to drive it soon.

Once I’ve chosen the insurance company, how long does it take to get started? Can the coverage start immidiately.

More specifically, I’m looking at AAA and the winner for consumerReports : Amica.

jcrosby81 asked:


Im going to pick up some stone from Tijuana on Sept. 16th and need to know how to buy insurance for my truck and trailer befor I go down. Are there places by the border?

Danno asked:


We have a 16 yr old daughter whos looking for her first car. We wanted to find a list (if one exists) of average insurance rates to see which cars cost the least to insure. This way she’ll know which cars she can afford. Thank You.

Chuck asked:


I am a student and I am using my parent’s address, but I don’t live there (I live in insurance hell aka Detroit). I would hate to pay all this money for insurance and if something happened I couldn’t get a claim authorized.

wagdy m asked:


My son got into a car accident in 2007. The plaintif sued him in the small claim court. The judge ordered my son to pay him.The insursnce company agreed to pay the full amount,but they never did.Sometime they say that he changed his address,or he never received the check, or he is not satisfied.Now for more than one year my son’s driver’s license is suspended. Can he sue the Insurance company?

Erin in California asked:


We are just starting out and wonder if our personal car insurance would cover test drives, or our driving the vehicles. It is a sole proprietorship.
We do have a bond insurance and just acquired two vehicles (our first since we are new) and have not been driving them yet because we are looking into insurance.

Philip Gimore asked:


Well this may sound like a long shot, but I just recently bought my son a 2000 Ford Mustang, Now its insurance time, hes 18, gets A’s in school and has had drivers ed. Why do the quotes from Progressive and esurance estimate its going to cost nearly $500 a month, even with a 1990 honda junker it still cost nearly $400 do these prices seem reasonable, i cant recall them being that high, when i first got insurance, thanks.