Car Insurance Basics
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Written by
Mathew B. Sims
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Reviewed by
Daniel Walker
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UPDATED: Mar 25, 2021
It’s all about you. We want to help you make the right coverage choices.
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- Knowing the basics about car insurance can save you money
- Several different factors affect your rate including age, gender, driving history, and credit score
- There are six different types of auto insurance coverage
Finding the auto insurance policy isn’t as easy as it looks. Since many factors can affect the level of coverage you need, educating yourself about the insurance marketplace is a smart decision.
Below is a breakdown of auto insurance basics you should know:
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What is auto insurance?
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Auto insurance is protection. When you enter into a contract with an insurance company, they agree to protect you from financial losses resulting from an accident, in exchange for your payment of a premium.
Your policy will define what losses are covered, and the coverage limits. Auto insurance provides coverage for property, medical expenses, and liability.
There are many different types of auto insurance that can buy to cover just the basics, all the way up to total comprehensive and collision coverage. It’s a good idea to educate yourself before making a final decision on which type of insurance is best for you.
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Choosing a Policy
If you watch any television or surf the Internet, you probably see ads for auto insurance companies every day. Some of them use cute, talking animals or perky sales girls. Some rely on catchy, rhyming jingles.
Others try to gain your business through deep-voiced, trustworthy-looking actors. Regardless of which type you like, the bottom is the same; you need affordable coverage.
When choosing an insurance company, the goal is to overlook the gimmicks and find real information that will help you make this important decision.
Buying auto insurance is not a one-size-fits-all solution. Just as everyone is different, so are their insurance needs. It’s a good idea to make a checklist of what you are looking for before you start your research.
How to Cancel Your Policy
There are several reasons why you may want to cancel your auto insurance. Maybe you found a better rate with another company. After a few years, you finally paid off your car and are no longer required to carry insurance on it.
Or perhaps you’ve decided to be more environmentally responsible, and have sold your vehicle in favor of riding a bicycle.
Whatever your reason, there is a process for canceling your insurance that will ensure it’s done quickly and that things go smoothly.
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How to File a Claim
Filing an auto insurance claim is something no one ever wants to do. It means something bad has happened to your vehicle, and it now needs to be repaired or replaced.
An accident or theft is very upsetting and not knowing what to do afterward just adds to that stress.
Having a checklist, and keeping a copy in your glove box, will help you get through the process of filing a claim.
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Types of Auto Insurance Coverage
A well-written auto insurance policy usually includes six types of coverage. They provide the broadest protection for the most common events for which you would file a claim.
In addition to those six basic types, several others apply to very specific events that may cause damage to your vehicle, or to specific needs you may have if you’re involved in an accident.
Auto Insurance FAQ
There are six types of auto insurance coverage. The most basic type is liability coverage. It protects you if you are at fault in an accident. Normally, you are only able to opt for liability only coverage when you own your vehicle outright.
If the vehicle is financed, the lender, the insurance company will most likely require you to have full coverage.
Below are the six most common types of auto insurance coverage:
- Liability
- Personal Injury Coverage
- Comprehensive
- Collision
- Uninsured
- Underinsured Motorist
Before making a final decision, weigh the pros and cons of each type of coverage. Decide which type best suits your particular situation.
Then, compare at least three quotes from different insurance companies to get a better idea of what each has to offer. You can get started now by entering your zip code below and using our FREE online comparison tool!