Whether you're a first-time car buyer or a seasoned pro, shopping for auto insurance can be confusing and even a little daunting. With so many options available, it's hard to know where to start. Do you need collision coverage? What's the difference between comprehensive and liability insurance?
At its most basic, auto insurance is designed to protect you financially in the event of an accident. But with so many different types of coverage available, it can be difficult to know what you need—and what you can afford. To help make the process a little easier, we've put together a quick guide on how to choose the right auto insurance for you.
The first step in choosing the right auto insurance is determining how much coverage you actually need. Of course, this will vary depending on a number of factors, including the value of your car and your personal financial situation. If your car is worth less than $1,000, for example, it probably doesn't make sense to carry collision or comprehensive coverage—because even if your car is totaled in an accident, your insurer will only pay out up to the value of your vehicle. On the other hand, if you have significant assets—like a home or savings account—that could be at risk if you're sued over an accident, carrying higher limits of liability insurance may be a good idea. The bottom line is that you should choose the amount of coverage you're comfortable with—keeping in mind that state laws typically require all drivers to carry at least some minimum amount of liability coverage.
Once you know how much auto insurance coverage you need, it's time to start thinking about the different types of coverage that are available. The most common types of auto insurance are:
This type of coverage protects you financially if you're sued over an accident or if you cause damage to another person's property with your car. Most states require all drivers to carry some minimum amount of liability insurance.
This type of coverage pays for damage to your car resulting from an accident—regardless of who is at fault.
This type of coverage pays for damage to your car resulting from factors other than an accident, including weather damage, theft, and vandalism.
This type of coverage protects you financially if you're involved in an accident with another driver who doesn't have any (or enough) insurance.
This type of coverage pays for medical bills and other expenses related to injuries sustained in an accident—regardless of who was at fault. Note that this type of coverage is not available in all states.
Some insurers also offer additional types of coverage beyond these basics, like roadside assistance and rental car reimbursement. These additional coverages come at an extra cost—so again, it's up to you to decide whether they're worth the price tag.
When it comes time to shop for auto insurance, there are a lot of factors to consider. But by taking things one step at a time—first determining how much coverage you need and then evaluating what types of coverages make sense for you—you can find a policy that offers both adequate protection and affordable rates. And that peace of mind is priceless.
