Understanding Auto Insurance : Types of Coverage

Everybody knows that if you have a car, you also must have car insurance; the government requires it! But this is likely a requirement you will eagerly accept, as insurance is the only way to protect yourself, your car, and all other drivers and vehicles on the road. So buckle your seatbelt and get ready for a fast guide to auto insurance!

When you sign up for auto insurance, you will have many options to choose from. It may be overwhelming. Not only will you have to compare different insurance companies, but you will compare different types of insurance too.

There are four basic kinds of insurance policies you can pick from and they will not vary drastically from insurance company to insurance company. So that is why it's important to have a strong grasp of them, so you can easily navigate the seemingly confusing world of auto insurance so that you can eventually navigate actual roads as an insured driver.

Comprehensive Coverage

If you're willing to shell out more than a little dough, you should definitely consider buying a full, comprehensive insurance policy for your car. You may already be required to, as many cars are financed by lenders who insist their owners purchase comprehensive coverage.

Expectedly, all medical costs and costs of vehicle damage that result from an accident or driving “mishap” are completely covered. With coverage like this, your car is typically even protected from bad weather, like hailstorms, and all sorts of other threats to your car.

A major advantage of this type of coverage is that no matter what happens, you are fully insured. Perhaps an uninsured driver rear-ended you at a stoplight. Even though he or she does not have insurance to cover the costs of personal injury and/or damage to your vehicle, your insurance company will take care of it. It does not matter who's at fault.

However, be wary. Every insurance policy has a few caveats, even the most expensive kind. Check to see if your policy will insure you 100%. It may not!

Third Party Coverage

There are two types of third party coverage – the type that is just one notch below comprehensive coverage and the type that is one notch below that.

The first type of third party coverage includes fire and theft, just like comprehensive coverage. However, the insurance company is only obligated to cover the cost of damages or personal injury if you were at fault in an accident involving a third party. If you were not at fault, you must cross your fingers that the person who is at fault has insurance. Similarly, if you damage your car in an accident that does not involve a third party (perhaps you slammed into a pole), your insurance company may not have to lift a finger for you. Third party coverage is a common choice among drivers who do not have loans for their cars, and are thus not required to get full coverage, yet still want a decent policy.

The second type of third party coverage does not include fire and theft. If your car is old and of little value, this is a great, cheap policy for you to consider – otherwise, it might be too basic.

Classic Car Coverage

If you own a vehicle that's been around the block more than a few times – for example, perhaps it's 30 years old – then you ought to investigate your options for a more specialized type of coverage. There are varying requirements for this kind of policy, so you will need to carefully compare all the car insurance quotes from companies that offer it to you.

It's important to thoroughly shop around for an insurance policy as it will not only affect your pocketbook on a monthly basis, but can have serious, financial consequences for you later down the road. These are the basic types of coverage, but you will need to comprehend the complexities and nuances of every policy you consider, so tread carefully!

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