Auto insurance protects you against financial loss if you have a car accident. It is a contract between you and the insurance company that you have a policy with. You agree to pay the insurance premium and the car insurance company agrees to pay your losses as defined in your car insurance policy.

Auto insurance has three parts:
1. Property coverage pays for damage to or theft of your car.
2. Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
3. Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

An auto insurance policy has many different kinds of coverage. Most states and provinces and even car financing companies require you to buy some, but not all, of these insurance coverage’s. Typically people purchase insurance for 1 year at a time but other options are available such as day permits, monthly, quarterly or BI-annual insurance. Your car insurance company should notify you by mail when it’s time to renew the policy and the amount to renew your policy.

Legally, as a driver of a vehicle, you are financially responsible for that car and any damages that may be caused by your vehicle. This financial responsibility is why we are required to have valid insurance for our vehicles. If you cause an accident that results in damages greater than the coverage you have you will have pay that amount back to your insurance company, possibly for the rest of your life.

Local laws generally specify the minimum coverage amounts for auto insurance. You may find it prudent to purchase greater coverage in order to protect your auto investment, pay for necessary medical expenses, cover your legal liability, and cover any additional losses related to automobile ownership.

It is important to know what each area of coverage does for you before purchasing auto insurance.

Auto Liability Insurance :

If you are involved in an automobile accident, you become liable for damage that you may have caused to another’s property. Property damage liability coverage protects you from such liability by paying for legal costs or damage claims that are filed against you as a result of an accident for which you are found legally liable. Bodily injury liability coverage protects you from escalating legal costs and claims filed against you in the event that you injure or kill someone in an automobile accident. The minimum amount of car insurance required differs across jurisdictions but keep in mind that skimping on liability insurance may cost you in the long run. Minimum liability insurance will not cover the cost of an accident resulting in the injury of several people.

Medical Payments :

By offering medical payments – personal injury protection, your automobile policy will cover you and your passengers’ medical expenses if you are injured in an automobile accident. Medical payments/personal injury protection also protects you as a passenger in someone else’s vehicle.

Medical Payments coverage only pays for physical injuries. It does not cover pain, suffering, or lost wages caused by an automobile accident.

Uninsured or Underinsured Motorists:

Protects you against drivers that may have caused the accident but are uninsured or underinsured. Uninsured or underinsured motorist coverage is also liability coverage for underinsured or uninsured drivers that you may collide with.

Coverage for Physical Damage to your Vehicle:

Protects your vehicle against physical damage caused by specific perils and usually is optional. Vehicle damage insurance is recommended for the simple reason that damages to a vehicle will quickly add up in the event of an accident where you are at fault. Individual automobile policies have different levels of peril coverage. There are two types of coverage: collision, which covers only collision damage, and comprehensive coverage, which covers all risks such as vandalism or fire. Individual automobile policies will define the perils your vehicle is covered against and the physical damage coverage included in your policy.

As you already know, auto insurance isn’t cheap and continues to go up in price each year. For this reason you should also do some comparison shopping on car insurance prices and coverage prior to signing any agreement. Here are some things to consider to keep your auto insurance rates at a minimum:

Statistics show that some vehicles are more likely than others to be involved in an accident. Car insurance companies are aware of this and therefore charge more to insure high-risk vehicles. The make and model of the vehicle, its color, and whether it’s a two door or four door are all factors considered by your car insurance company.
Some cars are also more expensive to repair or are frequently pursued by thieves. Online insurance quote companies can provide you with an idea of the cost difference as can your insurance broker.

Where you live may affect what you pay for car insurance. Driving to work everyday, especially if it’s a long commute, does not only mean extra gas and wear and tear on your vehicle but also the possibility of a higher car insurance premium. Urban residents may have higher premiums than those living in rural areas may.

Sometimes it doesn’t pay to be carrying collision or comprehensive car insurance on an older vehicle if the total amount you are paying for the deductible plus the monthly premium is more then the entire worth of your vehicle.

Prices for auto coverage can vary by hundreds of dollars, so it pays to shop around. Ask your friends, check the yellow pages or call your state insurance department. You can also check consumer guides, insurance agents or companies. This will give you an idea of price ranges and tell you which companies or agents have the lowest prices.

Deductibles represent the amount of money you pay before you make a claim. By requesting higher deductibles on collision and comprehensive coverage, you can lower your costs substantially.

If you have adequate health insurance, you may be paying for duplicate medical coverage in your auto insurance policy. In some states, eliminating this coverage could lower your personal injury protection cost by up to 40%.

Some companies offer car insurance discounts to motorists who drive less than a predetermined number of miles a year.

Be sure to ask about other insurance discounts. Some insurers offer discounts for more than one car, no car accidents in three years, drivers over 50 years of age, driver training courses, anti-theft devices, anti-lock brakes and good grades for students.

As with most insurance products, automobile insurance policies are comprised and purchased based on each individual’s needs.

There are specific exclusions, provisions, and limitations to each type and amount of coverage defined in individual automobile policies. Also, endorsements can be added in order to customize individual automobile insurance coverage. Before purchasing a car or renewing your insurance be sure to investigate your needs, the insurance products offered and how you can save money.