Auto Insurance Coverage

Auto insurance coverage can be a bit confusing. However, if you’re buying it for the first time or looking for a new auto insurance policy, you might not be sure of the process or appropriate questions to ask. It’s important to understand insurance enough to ask the right questions and make equal comparisons.

1. Know what type of auto insurance policy you need. Several types of auto insurance coverage exist, some mandatory, some optional. The main types are as follows:

• Liability coverage: This type of coverage is required by law in all but one U.S. state: New Hampshire. If you cause an accident, liability insurance generally covers costs associated with bodily injuries and property damages for the other people involved.

• Collision coverage: This insurance typically covers damages to your vehicle from a collision with another car or an object. If you are leasing or financing your car, you probably need to carry a minimum coverage requirement. This coverage is usually subject to a deductible (the amount that you must pay before the insurance goes into effect).

• Comprehensive coverage: Comprehensive auto insurance can cover damages to your vehicle resulting from anything other than a collision with another car such as animals, falling objects, natural disasters, theft or vandalism. Deductibles usually apply.

• Other types of coverage: In some states, you may have the option to purchase additional insurance coverage, some of which include:

• Uninsured/underinsured motorists’ coverage: This can protect you in the event that you are hit by someone who has no auto insurance coverage or not enough to cover the damages.
• Loss-of-use coverage: Also known as rental coverage, this type of policy helps cover the cost of a rental vehicle while yours is in the shop.
• Loan/lease payoff coverage: Often referred to as “gap insurance,” this type of policy usually covers the difference between the actual cash value of a leased or financed vehicle (in other words, the vehicle’s value after depreciation) and the balance of a lease contract. In the event that a leased vehicle is totaled or stolen, gap insurance could protect you against additional losses due to “gaps” between the insurance settlement and what you owe on the lease contract.

2. Get at least three auto insurance quotes.

Now that you have an idea of available coverage, it’s time to shop around for auto insurance quotes. Get at least three so you’ll be able to conduct a fair comparison. Most auto insurance companies provide quotes by phone, online or in the office of a local agent. You’ll need to provide the following information to get accurate estimates:

• A valid driver’s license

• Your vehicle’s make, model and year

• Features such as air bags, anti-theft or restraint devices

It’s important that you gather as much information as possible from each company. In addition to auto insurance rates, research the following:

• Coverage options: After the liability coverage you must have, find out what other coverage options are available to you.

• Discounts: See if you qualify for discounts. Factors such as marital status, insuring more than one car, good credit rating and an accident-free driving history could help lower your premium.

• Accident forgiveness: Typically, when you have an accident, your insurance premiums rise. Some companies offer “accident forgiveness” if a significant amount of time has elapsed between accidents.

3. Compare auto insurance quotes.

Once you have your auto insurance quotes , make sure the company is stable and offers responsive customer service. A low rate will not mean much if the company doesn’t help you after an accident.

You can see what others are saying about the companies you’re considering by going to the customer reviews sections of their websites. Examine each company’s general reputation. Have they been in business for more than a few years? Do they actively support their surrounding community? You want to align yourself with an organization that will be there when you need them.

Choose the auto insurance policy that’s best for you.

Buying your first auto insurance policy does not need to be overwhelming or stressful. By knowing how it works and asking the right questions, you’ll end up with a policy that fits your budget and your lifestyle.

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