What You May Not Know About Automobile Insurance

Perhaps the most commonly purchased type of insurance is automobile insurance, also called driver’s insurance or car insurance.   Although laws vary somewhat, virtually all states today require drivers to carry some sort of automobile insurance to legally operate a vehicle on public roads.  The penalties for driving without insurance can range from fines to a suspended license or, in the case of repeated infractions, possibly even a short jail sentence.  Given that driver’s insurance is required in pretty much every state, it’s worth having some basic knowledge about the subject.

Types and levels of Coverage

The type of insurance coverage a person needs, and how much they will pay for that coverage, vary depending on a number of factors, such as the age of the driver, his or her driving record, the age and value of the vehicle, the dollar amount of the coverage, and whether the vehicle is fully paid for.  While auto insurance can get pretty complex, there are four types that everyone should be aware of. 

Liability coverage is the most basic type of coverage; it protects the driver against any claims that might be brought after an accident or other incident that is the driver’s fault.  This is usually the minimum coverage that a driver needs to be considered insured.  Liability insurance usually has the lowest premiums, but it doesn’t cover any damage to the driver’s own vehicle; thus a lower monthly premium needs to be balanced against the risk of a potentially large financial burden.  Also, most loan lenders require a driver to carry comprehensive coverage until the borrower has paid off the loan in full.

Collision insurance covers part or all of the cost of repairs to the driver’s vehicle in the event of a collision, based on an estimate of the project cost for the repairs.  While collision insurance can definitely pay for itself in the even of a car crash, the monthly premiums are higher than simple liability.  Most policies are also subject to a deductible, which means that the policy carrier is responsible for paying a set amount before the insurance company pays.  Deductibles vary widely; generally speaking, though, the higher the deductible, the lower the monthly payments, and the lower the deductible, the higher the monthly payments will be.
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Comprehensive coverage is typically required for vehicles that are still in the process of being paid for.  Many vehicle owners also carry comprehensive coverage for expensive or otherwise valuable vehicles.  Comprehensive coverage covers damage that isn’t the result of a collision – fire, theft, vandalism, and so on – although the exact items covered can vary quite a bit from one policy to the next.

Uninsured Coverage protects you if an uninsured or underinsured driver hits you or your vehicle.  Although insurance is a legal requirement in most places, that doesn’t mean that everyone on the road is insured.  This type of coverage means that you won’t get stuck with the repair bill if someone less responsible than you involves you in an accident.

Each type of insurance is available at several different levels of coverage; the higher the coverage (in dollars), the higher the premium will be.  Premiums will also increase if the driver is involved in an accident or receives tickets for traffic infractions.  Additionally, premiums are higher for males than for females, for younger drivers, and for drivers in urban or higher-crime areas.  Despite this, however, automobile insurance is a necessity for any responsible driver.