What Kind of Auto Insurance Coverage Should I Have?

Liability Coverage

• In every state, you must have at least some type of liability coverage before you can drive your car on the roads and sets a minimum amount of liability coverage that you must buy. Liability insurance is a type of coverage that protects you if you cause accident. If you are responsible for an accident and you hurt someone else or damage her property, this type of insurance kicks in and pays for the damages. However, it will not pay for your damage or injuries.
  
  

Collision and Comprehensive

• When combined with liability coverage, collision and comprehensive coverage provide what is referred to as a full coverage auto insurance policy. Collision insurance pays for damage to your vehicle sustained while you are driving, regardless of whether the accident is your fault. If you hit a curb, for example, your collision coverage will pay for the cost to repair it. If the car is totaled, the insurance company will then pay you for the value of your car at the time of the loss. Meanwhile, comprehensive coverage pays for other types of damage to your vehicle that are not related to a wreck. For example, theft, vandalism and hail are covered by comprehensive coverage.
  
  

Type of Car

• When you buy auto insurance, you must consider the type of car you have so that you can choose the proper policy. If you buy a new car with an auto loan from the dealer, you will usually be required to buy full coverage. On the other hand, if your car is worth $1,500 and is paid off, it may not be worth it to pay additional premiums for collision and comprehensive coverage. In that case, plain liability insurance may make more sense.
  
  

Choosing Limits and Deductibles

• You can choose the liability limits that you want. Choosing a high limit adds extra protection if you're at fault in an accident. In addition, you can choose what type of deductible you want to pay if you get collision and comprehensive coverage. The deductible is the amount you must pay per loss and usually ranges from $250 to $1,000. As you might have guessed, higher deductibles lead to lower premiums and lower deductibles lead to higher premiums.