Monday, January 28, 2008

Auto Insurance Types

Familiarize yourself with three types of auto insurance: collision, comprehensive, liability. Read the brief description each of them.

There are two main types of automobile insurance in the United States: collision policies and liabilities policies. In most states it is required that the automobile owner carry at least liability insurance on any vehicles which are used on the road. You are not required to carry collision insurance, but most lenders require that you carry collision insurance if you are still making payments on your car to the lender.

Collision Insurance
The insurance policy which pays for damages to your car if you are in an accident and you are the one at fault in the accident is called collision insurance. Your insurance policy will pay for costs up to the fair market value of your vehicle. Besides, often the fair market value of the car is less that the amount which you still owe on the vehicle. In this case, you may want to look into gap insurance.

Comprehensive Insurance
This type of insurance is similar to collision insurance, except that comprehensive insurance pays for damages to your car when you are not at fault. It also pays for vehicle damages for things like vandalism, floods, storms and other acts of God. The amount of deductible which you pay on your policy influences the amount of premium cost that you pay for comprehensive and collision insurance.

Motorists often select deductible amounts of $250, $500, or $1000. Such amount you pay in repair costs first, before the insurance policy kicks in. Apparently, the more that you are willing to pay, the less the insurance company will need to pay, thus lowering the cost of the premium to you.

Liability Insurance
This insurance pays for all expenditures related to repairing any other cars involved in the accident. Liability insurance doesn't cover repair costs for your own vehicle, since comprehensive and collision insurance covers those costs. Liability insurance has a risk, since if the accident is your fault, you will have to pay for repairs to your own car.

You no longer are required to pay premiums for collision insurance, it will save you money in premiums to reduce the collision coverage. Be sure that you are protected as well as can be from the financial results of personal repairs cost due to an accident. You should consider, for instance the value of your automobile. You probably should drop the policy, if it has a value of $1000 $1500. If your $1000 car suffers $800 worth of damages in an accident, but the premiums on your $500 deductible policy are costing you $300 per year, it just doesn't make financial sense to continue to pay insurance premiums.

It makes sense to continue to carry collision insurance, if you are driving a $30,000 car. You can increase the deductible on the policy in order to pay smaller premiums. You will need to find out how much risk you can afford to carry yourself and how much will need to be covered by the insurance company.