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Take Cover! The Basics on Car Insurance - Part One


Throughout this great land of ours, car insurance is a legal requirement for every vehicle on the road. But there are no laws that say you have to pay too much for insurance or have more coverage than you really need. There's a lot to consider when you're shopping around for insurance, but even a little background information can help you get the best possible coverage and reasonable rates.

The three major types of car insurance are Liability, Collision, and Comprehensive. Liability Insurance pays for vehicle repairs and injury damages stemming from accidents in which you are at fault. This insurance is for the other party in an accident, and does not cover costs to repair your own vehicle or for injuries to you or anyone in your car. Collision Insurance is used to cover repairs to your vehicle whether or not the accident is your fault. Comprehensive Insurance covers theft of your vehicle, or damage caused by fire, flood, wind and the like. Other coverages are always available, and may or may not be necessary depending on the policies you already have.

Other Insurances to Consider

Medical Payment Insurance, or Personal Injury Protection (PIP) insurance, is required in all but 13 states where "no-fault insurance" is not in force. No-fault insurance states that if you are in an accident, whether or not it's your fault, your PIP insurance is expected to cover your medical expenses. You may be able to sign up for the state mandated minimum coverage of PIP insurance, depending on the life and health insurance you already carry.

Even though it's the law, many motorists drive while uninsured, or have too little coverage to pay for an accident. Uninsured/Underinsured Motorist insurance covers your car repair and personal injury expenses if the other motorist cannot. Such protection is usually well worth its cost - For as little as $50 per year, many motorists can receive this additional coverage.

Rental Car Insurance - Typically, your primary car insurance will cover you when you rent a car while traveling. Before you travel, check to make sure you're covered, and decline the insurance offered through the rental car agency. No use paying twice for the same coverage! Another type of rental car insurance will cover you if you're involved in an accident and need something to drive while your primary car gets fixed. If you have more than one car and can get by if necessary, this is another insurance you can likely do without.

If you're leasing a vehicle, Gap Insurance is necessary if the car is totaled and the leasing company needs a higher dollar amount to pay off the vehicle than your regular policy will provide. Your insurance agent will have this insurance available, but many leasing companies simply build the price into the monthly payment. Before you lease, you can still shop around for the best price available - the best deal on Gap Insurance isn't always from your leasing company.

Roadside Assistance will cover the cost of towing and other aid in case you break down. If you already belong to an Auto Club like AAA, you can decline this coverage and rely on your Auto Club to provide assistance.

These are the primary coverages you can expect to pay when you insure your new car. In Part Two, we'll look into rating an insurance company, finding an agent, and more ways to reduce your insurance rate.