You may be a good driver, but not everyone else is. Insurance protects you in case of accident or emergency.

What is Auto Insurance?

Auto insurance protects you from the risks that come with owning and driving an automobile. If you are driving without proper insurance coverage, you are exposing yourself to huge financial risks. There are two basic categories of auto insurance:

• Liability Coverage pays for the damage you cause to others and their property. This includes medical costs of the injured person.
• Physical Damage Coverage pays for the damage of your vehicle when you are the cause of an accident. This also includes the cost of repairs in certain non-collision situations such as fire, theft, and other similar situations.

How Much Auto Insurance do I Need?

An auto insurance agent would best answer this question. However, here are some factors to consider:

• Driving record/history of the person that will be covered by the insurance policy
• Primary use of the car (business or personal use)
• How far the car will be driven each day.

Note: The more insurance coverage you require the higher your insurance cost will be.

Physical Damage Coverage

• The current market value of your car will determine how much physical damage coverage you will need. There is a direct relationship between these two items. As your car's market value declines so should the amount of physical damage coverage. It will decline until your auto insurance premium costs as much as or more than repairing or replacing your car.

What Products Are Available?

In addition to liability and physical damage, there are many other types of auto insurance coverage that you can purchase. Your need for this additional coverage will depend on what is required by state law and how you plan to use your car.

• Uninsured Motorist
  This is required in some states and optional in other states. This coverage will pay for property damage and bodily injury costs caused by a driver who has no insurance.

• Underinsured Motorist
  This is similar to uninsured motorist coverage. If it is part of your auto policy, you and your car are protected against drivers who have caused property damage and bodily injury but whose insurance coverage is too low to pay for the damages that they caused

• Additional Coverage

Note: This additional coverage is often offered through credit cards, car manufacturers, and automobile club memberships. Therefore, if you have this type of coverage already, you won't need to include this in your auto insurance policy. There is no need to have double coverage.

What's Next?

Now that you know the types of coverage that are available, you should consider the following items when selecting the proper insurance coverage:

• Deductibles This is the amount of money you must pay before your insurance company will pay for damages. Higher deductibles (more cost for you in case of an accident) mean lower premiums. If you take high deductibles, and you aren't involved in any accidents, you can save a lot of money.

  Note: Make sure you have the right amount of cash or liquid assets to pay the deductible.

• Liability Limit
  This is the maximum limit that your insurance company is required to pay for a liability claim. Lower liability limits mean lower premiums, but less coverage if you are involved in a serious accident.

• Discounts Try to make use of various discounts on auto insurance policies that are available for items such as multiple cars, driver training, anti-theft systems, good driving history, and anti-lock brake systems. Also, some companies offer student discounts. This varies by state as well as by company.

Tips

• Claims
  Try to avoid filing small claims. If you file several small claims, your insurance company may raise your premiums.

• Shopping for a Car
  When shopping for a car, sports cars and luxury cars have higher premium rates. If you really need to drive a Mercedes or BMW, be prepared to pay substantially higher insurance rates.

Click below for Additional Information

• Insurance Information Institute