Understanding the benefits and differences between car insurance policies is essential before purchasing car insurance. It is not enough to shop for insurance based on cost. It is important to know the answers to questions like:
- What is Comprehensive Auto Insurance?
- What is an Auto Insurance Deductible?
- What is Full Coverage Auto Insurance?
- What is Car Liability Insurance?
Comprehensive car insurance covers your vehicle if it is damaged or stolen, vandalized, or hit by a falling object. Comprehensive coverage also covers glass breakage. Comprehensive coverage can also be referred to as “other than collision” coverage.
This is your liability section. It pays any other people involved in an accident. Comprehensive coverage does not cover you. It is not mandatory unless your vehicle is leased or secured by a loan. The lender or lessor will likely require that you have comprehensive coverage if your vehicle is leased or financed.
The collision and comprehensive sections of your car insurance policy are covered by a deductible. These two aspects of your automobile insurance policy can be optional. Each deductible amount can vary. Your deductible is the amount your insurer will pay to repair your vehicle or replace it. Your insurance company will pay $2500 if you have $3,000 worth body work on your vehicle due to a covered accident.
Your premium will likely be lower if you have a higher deductible.
Full coverage car insurance covers automobile insurance policies that include not only the mandatory liability section but also optional comprehensive and collision coverages. These coverages are called physical damage coverage. If you don’t own your vehicle, you may need full coverage. Most likely, your lender or leasing company will force you to sign a contract for full coverage.
You can reduce the cost of your auto insurance by increasing your deductible for collision and comprehensive coverages. You will be at greater risk, but an older vehicle might make this easier and you could consider eliminating physical damage coverage.
Your liability insurance for your car is the coverage that pays the other driver in the event of a collision. Every state in the US requires liability insurance. This is also known as proof of financial responsibility. This coverage does not include a deductible.
Although liability insurance is compulsory, the mandatory limits may not provide adequate coverage in the event of an accident that results in significant damage. Make sure you understand the basics of this coverage and that you get the correct amount.
If you want to purchase the right policy, it is essential that you understand how your auto insurance policy works.