When you buy a car, it can feel like you have to jump through a lot of hoops before you’re able to freely enjoy your new set of wheels.
One of these requirements is owning car insurance. Each state has its own minimum coverage levels for liability insurance. Some people choose policies that cover more than the minimums. Additional options, such as collision and comprehensive, are available as well. To make matters even more complicated, many different companies offer auto insurance plans.
If your head is spinning with questions about how to choose the right insurance amount, type, and company for you, you’re not alone. Here’s some information that should clear things up.
First, let’s talk about liability insurance. It covers you for bodily injury and property damage if an accident is your fault. The amount of coverage is expressed in three numbers. For example, let’s look at the minimum auto insurance requirements for Virginia: 25/50/20. The first two numbers (25 and 50) refer to bodily injury. In this case, it means the insurance company pays out up to $25,000 per person, with an upper limit of $50,000. In a situation where there are three people needing $25,000 each for medical expenses, you could be sued for the remaining $25,000 your policy does not cover. The third number refers to the maximum payout for property damage, so in this case the policy would pay up to $20,000 to fix the car you hit.
(For a handy list of minimum liability requirements by state, hit this link and scroll toward the bottom: http://personalinsure.about.com/cs/vehicleratings/a/blautominimum.htm)
There are two additional types of auto insurance: collision and comprehensive. Collision covers repairs to your car if you’re in an accident. Comprehensive covers theft, vandalism, and damage to your car from disasters such as fires and floods. Despite the name, comprehensive may not cover every single thing that could happen to your car, so it’s important to know what your policy does cover and whether you’re comfortable with it.
So what type(s) and amount of insurance should you buy? The most important factor in answering that question is what you feel comfortable with. Here are some points to consider.
Is your car more than five years old? Many people who drive old cars are comfortable with liability insurance only. Some of them choose the state minimum, while others prefer a higher amount of coverage. To figure out your comfort level, think about where you usually drive your car, how much you drive it in a week , and how much you’re willing to spend on a premium to insure an old car. (Remember if you insure at a low level, you could be sued for whatever your policy does not pay.)
If you have a newer car, or a car you really love, consider adding collision insurance to get your ride straightened out in case it’s banged up.
Finally, if your car will be spending time in sketchy areas, or you have other reasons to worry about something happening to it while you’re not looking, you may want to buy comprehensive insurance as well.
As far as choosing a company is concerned, it is easy to shop the internet for the best price, or talk to some sales reps on the phone. Competition for auto insurance customers is pretty steep, which works out well for those of us looking for plans.
Remember: knowledge is power, so ask questions and get answers. Pretty soon you’ll be cruising down the highway with complete peace of mind, and one less hoop to jump through.