• What is the purpose of having auto insurance?

An auto insurance policy is designed to protect you financially in case of an accident. This includes damage to your car as well as other cars. It can also include theft in case your car is stolen and damage from vandalism or weather. The exact coverage you have will be stated in the policy.

• What is an auto insurance policy?

This is simply the contract you enter into with an insurance company. For a certain amount of money, known as premiums, you will have a certain amount of insurance as stated in the policy. If an accident occurs, you can file a claim with the insurance company and receive compensation for certain damages.

• What types of coverage are available with an insurance policy?

There is liability and property damage that is the most basic type of insurance and is required by law in most states. This is the insurance that pays the other driver if the accident is your fault. Comprehensive coverage is the type of insurance that covers your car if you get into an accident that is your fault or you are a victim of a hit and run. It will also cover damage from weather such as a thunderstorm and will cover the theft of your vehicle. Uninsured motorist is coverage for damages from a driver that had no insurance, and medical coverage is for the bills that occur from a car accident.

• What type of insurance should I buy?

Insurance can be cheap and it can also be expensive. What you buy should be dependent upon your financial needs. If you are making payments on the car, your finance company or bank will require you to have full coverage. However, if you own the car yourself, you may want to get only the minimum required. This is especially true if the car is old and not valuable. It may be important to consider theft as any car can be stolen.

• What does my income and net worth have to do with car insurance?

There are limits to how much liability insurance is paid out for a claim and naturally it is what is in your policy. The higher the limit the more the premiums will be. However, if you have a lot of assets and get into an accident, there is a good chance that the other driver will get an attorney and sue for damages. If the policy amount is small, it will be your assets that are the target of the attorney. Those who have a lot to lose are better off with higher liability coverage amounts.

• How does the value of my car affect my insurance premiums?

If you car is stolen, the money you are paid will be the replacement value in current market dollars. Older cars are worth less, so premiums are lower. Older cars usually cost less to repair because the parts or cheaper, but this is not always true and is dependent on the model as well as the year.

• What is a deductible?

A deductible relates to the comprehensive portion of car insurance. It represents the amount of money the policyholder will pay before the insurance begins to pay. If the deductible is $300, a policyholder must pay this full amount first. If the total bill for car repair was $500, the policyholder pays $300 and the insurance company would pay the balance of $200. The higher the deductible for a policy the lower the premiums will be.

• How does having children of driving age affect insurance?

They are more expensive to carry on any general insurance policy because of their inexperience in driving. Often it is a good idea to have additional coverage as they are more likely to get into an accident.