Basics of car insurance

In addition to protecting you financially, car insurance is a social responsibility. Driving without insurance or the ability to pay for the damage you cause in an accident will put others at financial risk.

All states except New Hampshire require car owners to prove that they have the financial capacity to bear the costs of liability if they cause an accident, and most require that by having car insurance. New Hampshire requires drivers to prove financial responsibility after an accident.

Car insurance policies consist of six main types of protection. Depending on where you live, some are mandatory and some are optional.

Car insurance consists of the following types of protection:

Bodily injury liability

Property damage liability

Medical payments (MedPay) or Personal Injury Protection (PIP)

Collision

Comprehensive

Uninsured/underinsured driver protection (UM/UIM)

In addition, such as road

When people talk about having "complete protection," they generally mean having responsibility, collision, and comprehensiveness.

Let's take a look at each type of such protection and help you determine if you need it.

Liability insurance

Liability protection pays for damage you cause to others. It is usually written in three numbers, such as 20/40/10. That figure translates to $20,000 for bodily injury protection per person, $40,000 for bodily injury protection per accident, and $10,000 for property damage protection per accident.

This insurance also pays your legal costs if you cause an accident.

Bodily injury liability will pay medical bills and lost wages for others when an accident occurs through your fault, except in "no fault" states where your own personal injury protection coverage (PIP) will pay for your injuries.

Property damage liability pays for the cost of repairing or replacing the property you damaged. This includes other cars or other property, such as fences.

Each state sets a minimum limit on the car insurance you must buy, but you may find that the limit is very inadequate. If you cause a major accident, you will soon exceed your limits — and will have to be personally responsible for the rest.

If you cause $65,000 worth of damage and have a $40,000 insurance limit, you are responsible for the remaining $25,000 and can be judged for it.

Liability insurance does not have a deduction amount.

Collision and comprehensive insurance

In contrast to property damage liability, collision insurance pays for the repair costs of your own vehicle in the event of an accident. Your collision claim check will be reduced by the amount of your collision deduction.

Your car is considered "completely damaged" when the repair costs exceed a certain threshold of the value of the car, for example 70 percent. At that time, the insurance company will evacuate the car to the dump and offer you the actual cash value of your car, reduced by the amount of deductions.

To keep the cost of your premiums low when purchasing collision insurance, you can increase the amount of your deductions. The higher your deduction amount, the lower your premium. But remember, you will have to pay the amount from your own pocket.

Comprehensive insurance pays for damage to your car that was not caused by a car accident. These include theft, fire, vandalism, natural disasters, and collisions with animals (such as hitting a deer). Damage to your windshield may also be covered by your comprehensive insurance. In some countries, comprehensive insurance includes repair and replacement of glass without a cut, but this differs from country to country. Ask your agent for details when you purchase your policy.

Although neither collision nor comprehensive insurance is required by any state, your lender (if you finance your car) may require that you have this coverage until you pay off your car payments in full. Once your car is paid off, you can remove collision and comprehensive insurance, although you may want to keep those protections in place to protect your investment in the vehicle.

Medical payments and Personal Injury Protection

Medical payment protection (called MedPay) pays for medical expenses suffered by you and your passengers after an accident. You also get coverage for injuries if you are driving someone else's car or injuries sustained if a car crashes into you. MedPay will pay regardless of who caused the accident, although if someone else is at fault, your insurance company can claim damages from the other party.

Personal Injury Protection (PIP) pays for lost medical expenses and salaries for you and your passengers injured in an accident. It also covers funeral costs. PIP is required in 16 states

Additional car insurance

Various additional facilities are available. Remember that making a claim for one of them, such as towing, will be recorded as a claim in your records.

Rent reimbursement pays for car rental when your vehicle is damaged or stolen. Check the dollar limit per day and the overall maximum limit to make sure you're getting good value for your premium.

Crane protection and road assistance pay the costs resulting from vehicle damage.

GAP insurance (gap) for new vehicles pays the difference between the actual cash value of the vehicle and the remaining amount of your car loan if your vehicle is declared a total loss.

Car insurance rates

Car insurance companies spend considerable time and effort in determining the price of the policy. The factors that are usually used are:

Your Address.

Your driving record.

Your credit (except where state law prohibits the use of credit information in insurance pricing).

Claim your past.

Your Vehicle.

Your daily commute and / or number of miles per year.

Other price-determining factors also play a role, such as whether your car will be parked in the garage when you are at home.

Types of high-risk car insurance

A poor driving record can put you on an unpleasant insurance journey for years. You may be forced to use an alternative policy type until your record improves, such as:

SR-22 and FR-44. The dreaded SR-22 and FR-44 are insurance certificates that prove to your state that you have car insurance. You may be required to get one of these if you have been obtained a DUI, proven to have done careless driving, or caught driving without insurance. Not all insurance companies will provide SR-22 or FR-44, so you may have to make a few calls or look up information online.

Non-standard policy. If you accumulate a number of accidents or violations, the insurance company may rate you as "high risk."This means you will pay more for car insurance until your accident and infraction are removed from your record. Many insurance companies sell high-risk policies.

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