There are three main types of auto insurance available:
1) Auto Insurance Comprehensive Coverage
2) Auto Insurance Collision Coverage
3) Auto Insurance Liability Coverage
These vary based on what they protect and cost.
Auto Insurance Comprehensive Coverage covers damages to your car that are not caused by other motorists. These damages include, fire, theft (of the whole car, or parts of it i.e. Stereo, Rims), damage from acts of God, such as ice storms, tornados, hail and floods. Lastly it covers if you hit a deer, or if your vehicle gets vandalized.
This type of coverage is optional and should only be purchased if your vehicle is worth more then $1000. Auto insurance comprehensive coverage does not raise the premium very much, and you can choose deductible amounts of $250, $500, and $1000. It’s best to go with the $250 deductible, as the higher deductibles, don’t lower your premium enough to be worthwhile.
Collision coverage covers your own car, when you encounter physical damage to it, as a result of a collision. So if you crash into a light post, or hit another car, this insurance will pay to fix YOUR car.
Again this coverage is optional and the deductibles range from $250, $500, and $1000, and if your car is worth more then $4000, I urge you to get this coverage, so if you are ever involved in a accident, you won’t be left with a large bill to fix your car.
Liability coverage is different from comprehensive and collision coverage, in that you are required by law to have a minimum amount in most states and provinces. Whenever you drive a car, you are capable of causing damage, to property or to other persons. Since most people don’t have the money to cover these damages, governments require drivers to have liability insurance that will cover any losses that you cause on anyone or their property.
While you are driving, if you cause an accident, your insurance company will pay for anything you damage and for the medical bills for anyone you injure. They will cover the expenses, up to a maximum limit that you agree for when you purchase the insurance policy. This limit can be anywhere from $50,000 to $1 million, depending on where you live. The amount of maximum liability coverage, will affect the amount you pay per year (your premium), with a smaller maximum liability, leading to a smaller premium.
However, it is not smart to save a couple dollars here by skimping on your maximum liability coverage, as any damages over your limit, will be your responsibility to pay. That means if you only have $50,000 liability, and you cause $60,000 worth of damage and medical bills, you will be on the hook for the other $10,000!!!
It is best to have at least $500,000 or $1,000,000 liability, that way you will surely be able to cover all damages and expenses you cause.