What Is Auto Insurance?

Basically, auto insurance protects drivers in the event they are involved in an accident. Nearly all states require drivers to purchase some form of auto insurance before driving on public roads.

This article will address the following topics (just click on the link to take you to the section):


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What do you know about your insurance policy? Could you find an insurance company that would provide more insurance for less?  Check this out?  Enter your zip code to get your FREE auto quote now!   See how much you could save and yet get the same or additional coverage. You should review your policy to ensure that you have sufficient coverage as you acquire assets during your lifetime.

Function Of Auto Insurance 

The function of auto insurance is to protect drivers when they are involved in a car accident or other type of incident affecting the car such as fire or theft.  If an accident or incident occurs and is properly reported, the auto insurance company pays the policy owner the applicable amount.

Features Of Auto Insurance

Basically, insurance policies contain two components:
  • The amount of financial coverage the insurance company is responsible for.
  • The amount the policyholder pays for the coverage purchased.

Types Of Coverage 

All auto insurance policies require liability coverage (except the states of New Hampshire and Virginia).You must purchase the required state minimum. The insurance company in your state knows what this minimum is. You will need to purchase liability coverage greater than the minimum to protect your assets. This will vary from individual to individual. The more wealth you acquire the more at risk you are for a law suit being filed against you. Consider increasing the liability coverage to an amount equal to the value of all your assets including investments. If the value of your assets is greater than the amount of liability the insurance company offers, consider adding a "liability umbrella" that will kick in when your auto liability limits have been reached.

The following coverage may be optional depending upon the state where your policy is written:

  • Medical payment
  • Bodily injury
  • Uninsured motorist
  • Under insured motorist
  • Collision
  • Comprehensive
  • Towing
  • Personal Injury Protection (PIP or No-Fault) 

Factors Influencing The Amount Of Coverage

There are three basic considerations:

  • The value of your car.
  • How safe a driver you are.
  • How much you want to pay out of pocket when an accident occurs.

    Ways To Lower The Premium
    • Ask about discounts. Here are some that you can inquire about: low-mileage discount, good student discount, safety discount, multiple policy discount and college graduate discount.
    • Buy a car that the insurer considers safe to drive.
    • Pay higher deductibles.
    • Maintain an excellent driving record.
    • Install anti-theft devices on your vehicle.
    Drivers can also reduce their premium by removing collision insurance coverage on their vehicle depending upon the value of the car. As the car gets older, the value of the vehicle is being lowered through deprecation. To check the value of your car go to www.bluebook.com. If the annual premium is near the value of the car, the need for paying collision is not warranted.

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