Car insurance can be a confusing topic!
If you’re just starting out, it seems even more complicated. After all, many companies offer different coverage packages that are not easy to understand.
How do you know what you need and what you don’t?
That’s why we’ve put together this simple guide to the basics of car insurance so that you can understand what to look for when buying your first policy or renewing your existing one.
What Does a Car insurance cover?
When you get a car insurance, you will choose different levels of coverage. Some are mandatory and some are optional (but very useful). So before doing your selection, here are the different coverages that you will encounter:
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Bodily injury liability coverage
Bodily injury liability insurance is your first line of defense against costly lawsuits if you cause an accident.
If you are found at fault for causing bodily injury or property damage, your insurer will pay out up to a certain limit defined in your contract.
Keep in mind that not all states require drivers to carry Bodily Injury Liability—but it is always a good idea.
Property damage liability coverage
If you are in an accident that involves damage to another person’s property, then your property damage liability coverage kicks in. It will pay for any damages you cause up to your policy limit.
For example, if you are in a crash that totals another driver’s car, your insurance company would pay for repairs or replacement up to your policy limit. If you have comprehensive and collision coverage, it will kick in after paying out what is covered by property damage liability coverage.
If you have collision coverage, your insurer will pay for repairs or replacement if your car is damaged in an accident with another vehicle or object.
Collision insurance isn’t mandatory but it’s a good idea if you can afford it because collision damages are very expensive.
Comprehensive coverage helps pay for any damages caused to your cars, such as fire, theft, vandalism, weather damage, floods or hail storms. These types of losses aren’t usually covered under a collision policy.
This is an optional coverage, but it’s highly recommended. This portion of your policy helps cover any medical expenses for anyone injured in an accident you caused.
Underinsured or uninsured motorist coverage
If you’re in an accident with a driver who doesn’t have enough car insurance or doesn’t have any at all, you’ll want underinsured motorist coverage. This will protect you if that other driver isn’t able to pay for your injuries, property damage or vehicle damage.
How do you choose between car insurance companies?
When it comes time to make a decision on car insurance, you might be overwhelmed with all of your options. There are many different car insurance companies out there, each offering its own unique policies.
At first, decide which type of coverage you want then logically you would want to take the cheapest insurance.
However, be aware that not every insurance company offers the same level of service in case of an accident. Some companies may reimburse you quickly without much trouble, some may take forever. In this case, look for reviews online and select the one that will give you the less headache at the best price.
Mistakes People Make When Getting Car Insurance
Here is the most common mistake people make when getting a new insurance
- Getting too much or not enough coverage (understand what each coverage means and select the one you really need)
- Not shopping around: get at least 3 quotes and select the one that seems the best. You can even call back the insurance company and tell them another company is giving you a better price. Don’t hesitate to negotiate!
- Paying too much after becoming a risky driver. If you don’t want to overpay your insurance, don’t get in trouble such as speeding, or getting into at-fault accidents…
Can You Cancel Your Car Insurance
Usually, car insurance lasts for one year. Then you can renew it or go with another insurance company.
You can cancel your car insurance at any time but be aware that you may have to pay a penalty. Refer to your contract for more information.
Now keep in mind that when you own a car, you always need to have car insurance even if you just park your car in your garage and don’t drive it (though the insurance will be much cheaper).
Navigating the twists and turns of automotive journalism, Matt brings a turbocharged blend of passion and expertise to the page. His writing is a thrilling ride, leaving readers on the edge of their seats without inducing literary diarrhea. Buckle up for articles that make your heart race, without the need for a literary airbag to shield you from puke-inducing prose – just pure automotive excitement that revs up your reading experience, minus the unnecessary sex appeal.