Car Insurance: 4 Things You Need to Know

Anyone who owns a car probably knows something about car insurance. That knowledge may include how to get a quote, what a deductible is, or even what a coverage limit is for. But there’s a lot more car owners should be aware of (especially if shopping for a new vehicle). Here are four important things you need to know about car insurance.

You Have Many Coverage Options

When you buy car insurance, you’re buying what’s commonly known as a policy. These are determined by various factors like the type of car you drive and where you drive it to, but are really just a package of different insurance coverage. Some of this coverage may be required by your state while some may be completely optional. Types of coverage include: liability, collision, comprehensive, medical coverage, PIP, uninsured motorist, underinsured motorist, and rental reimbursement. For an awesome explanation of each, check out Allison Klein’s HowStuffWorks article.

Car Insurance Laws Vary by State

Before buying car insurance, it’s important to be aware of minimum coverage requirements in your state. Out of 50 states, 47 require that you purchase liability insurance, which covers bodily injury and property damage caused to another driver. Some states, 15 total, including Florida, New York, and New Jersey, require that you also buy personal injury protection, which covers your medical costs and lost wages in the event of an accident. If you’re wondering what minimum car insurance laws are in your state, NerdWallet breaks it down nicely.

Additional Coverage Is Recommended

In every case, you must buy at least the minimum coverage required by law. But to better protect yourself, consider buying additional coverage. Unsure about which coverage options are the best? Think about your situation. If you total your car, can you afford to replace it? If not, invest in collision and comprehensive coverage. Do you lease your car? If so, gap insurance (which pays the remaining value of the car if it’s totaled) would definitely be a wise addition. Minimum coverage can be a gamble, so consider additional coverage if you can afford it.

Pricing Varies Widely

The price you pay for car insurance varies widely thanks to certain factors, like the type of car you drive, its value, and its theft rate. If you’re in the market for an exotic new sports car, you’re going to pay a lot more to insure it than a family van. Where you live also plays a role. If you reside in a city with a high accident or vandalism rate, you’ll pay more than if you lived in a rural area. Other factors that affect price include how often you drive, your age, sex, marital status, and driving record.

Knowing about car insurance is important. No matter what your situation is, always be sure to buy a policy that’s not only in compliance with state law, but also covers you for everything you need to drive safely and securely on the road.