Understanding Automobile Insurance

Losses from property damage, medical and legal costs, and lost income add up to billions of dollars annually for automobile mishaps. Automobile insurance plays an important role in protecting consumers from serious financial losses that can result from such accidents. Because there are more people driving now than ever before, hence more accidents, auto insurance rates continue their relentless drive upwards. Understanding automobile insurance and how it works can help consumers to make wiser choices in their driving habits and thus bring down their premium costs.

Each state has slightly differing automobile insurance requirements so you should visit the Insurance Information Institute's web site at www.iii.org to find the specific auto insurance coverages required by each state. Auto insurance rates vary wildly between companies and quotations can be very confusing, with different cover and different deductibles so understanding automobile insurance cover and exceptions can help clear up a lot of this confusion. Some of the basic coverages available are:

• Liability Coverage
• Collision Coverage
• Comprehensive Coverage
• Personal Injury Protection
• Uninsured or Underinsured Motorist Coverage

Liability Coverage

Most states require you to carry liability insurance that pays for property damage or physical injury to others if it's caused by you. Consider carrying enough liability insurance to safeguard your possessions from a huge lawsuit

Collision Coverage

Collision covers repair costs for your vehicle after an accident when you are at fault. To lower your insurance premium, you may choose a higher deductible as a trade-off. In fact, the difference in premiums between a $500 and a $1,000 deductible policy could be substantial and well worth the $500 out-of-pocket difference.

Comprehensive Coverage

Comprehensive covers most everything else that causes damage to your car, other than accidents and excluded events. Examples include damage from theft, fire, vandalism, flooding, and hail.

Personal Injury Protection

Personal Injury Protection pays medical expenses resulting from an accident for you and others riding in your car. Also pays for you or your family members injured while riding in another's car or while walking.

Uninsured or Underinsured Motorist Coverage

Uninsured or underinsured motorist coverage pays for costs related to injuries or property damage to you or your family members and guests in your car caused by an uninsured, underinsured, or hit-and-run driver.

Automobile insurance rates are not only determined by the amount of cover you opt for, but include many risk factors. Some of these you may have no control over, such as your age, your location and the accident rate in your area. Other factors which you can determine some control over are the type of car you drive, the amount of miles you drive each year, previous claim history and driving history and your credit history.

It is important to remember that when purchasing automobile insurance people should tell the truth, even if it may raise their auto insurance rates slightly. This is much better than having your insurance invalidated because of untruths. Even a cursory understanding of automobile insurance can help you to obtain not only cheaper insurance but hopefully better quality insurance, which can work out a lot cheaper in the long run.