Let’s talk about car insurance. It’s a resource absolutely critical to your financial protection.
That’s right. Like all other kinds of insurance, the value of car insurance is to protect you from major expenses that you couldn’t afford otherwise. For example, auto insurance can help you repair a car that’s damaged in an accident, or pay hospital bills. Keep in mind that auto insurance can include many different types of insurance on one policy.
So what kinds of coverage do you need? You’ll find that some types of insurance are required to register a car in your state, while others are optional. Ask an insurance professional to learn more.
How much coverage is enough? In terms of your vehicle itself, the amount of coverage you need depends on how much you could afford to spend to repair or replace it. The higher the value of your car, the more coverage you should consider. For other forms of insurance, you should have enough to protect your assets in case you get sued. Again, it definitely makes sense to consult with insurance professionals, consider their advice, and then comparison shop before you buy.
To get started, here is some basic insurance terminology with concepts you should know.
When you buy insurance, you receive an insurance policy, that is, a document that spells out exactly what is covered and what is not covered.
Collision coverage insures you against damage to your vehicle caused in an accident.
Comprehensive insurance protects you against other forms of damage to your car, such as fire, theft, flood, and vandalism
Liability insurance pays for injuries and property damage you cause to other people’s property with your car if you’re at fault.
Medical payments covers medical care for you and your passengers if injured in an accident in your car.
Personal injury protection covers medical and other expenses (such as loss of income) in the event of an accident in your car.
Uninsured/underinsured motorist coverage pays you if you’re injured by a driver who doesn’t have enough insurance, or if you’re injured in a hit-and-run accident.
Optional insurance may cover additional expenses such as towing, rental car benefits while your car is being repaired, or roadside service.
How deductible impacts premium
Typically, the higher the deductible amount, the less expensive the insurance premium. So a good strategy is to get a policy with the highest deductible that you’d be able to comfortably afford if you had to. This will minimize the cost of your policy.
Your credit score
Your credit score could impact how much insurance companies charge you in premiums. To learn more about credit scores, see the topic Using Credit to Your Advantage.
This information is not intended as legal or financial advice. Please consult your legal or financial advisor for more information.
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