Buying Auto Insurance: Starter's Guide

Basic Concepts and Terms

Auto Insurance has several different pieces and terms to understand. Coverage is the part of the insurance that states when you will be compensated. It also specifies how much. A Policy is the complete agreed upon types and amounts of coverage.

Premiums are what you pay regularly to keep your auto insurance active. You probably have to pay a large lump-sum up front. Deductibles are the amount you pay out of pocket for damages to yourself, passengers, other drivers and vehicles, or your vehicle. If you set a deductible at $1000 and your accident results in $2000 of damage, you pay $1000 and your auto insurance pays $1000. The higher the deductible, the lower the premium.

Picking Coverage Types

Comprehensive Collision Coverage – If you hit another vehicle or an object, collision coverage pays for your vehicle repairs. This is for when you are at fault. It is often just called Collision Insurance.

Comprehensive Other than Collision Coverage – This covers damages to your vehicle that are caused by most things other than another vehicle: trees, storms, fire, mailboxes, animals. It may even cover theft. This is what is commonly meant by the term Comprehensive Insurance.

Medical Coverage – Pays for medical expenses to the driver and passengers of the insured vehicle up to the amount of coverage taken out. Fault does not matter.

Uninsured/Underinsured Motorist Insurance – If you are hit by a driver with no insurance, you may need this to pay for your damages. Uninsured Motorist Coverage also pays for hit and run damage. Underinsured Motorist Coverage pays for repairs when the at-fault driver does not have enough coverage to compensate you completely.

Personal Injury Protection (PIP) – This is for no-fault states. It covers your medical expenses and work loss, regardless of fault.

Gap Auto Insurance – This covers the difference between sticker price on a new vehicle and the book price once it hits the road. A new car loses value when it is driven, so if you total it within the first few months, Gap Auto Insurance makes sure you are covered for the whole cost.

Choosing Coverage Amounts

Your coverage amount should be based on your assets. For example, if you do not have health insurance, you may need a lot of medical coverage—especially if you drive with children.

Shopping

Get some free auto insurance quotes here, pick the best deal from the list of trustworthy insurers, then contact them about any discounts.