Types of Auto Insurance Coverage

The most commonly recognized coverages, in addition to the basic liability are collision and comprehensive coverages also known as other than collision coverage. This article will explain the differences in coverage and what is covered so when you get free insurance quotes you will be well informed.

Collision Coverage

Collision coverage will pay for damages resulting from an automobile accident where you collide with another object, such as another car or tree. The coverage is comparable expensive when compared to the other coverages included in a car insurance policy. Collision coverage is optional and isn’t required by law, although a leasing are finance company my require it.

If you have an older vehicle worth less than $2,000, there is little reason for you to purchase collision coverage, because you are likely to pay more money in premium than you would ever receive as a result of a claim. Auto insurance policies only require the company to cover your financial expenses, not to replace your vehicle. In the case of an accident involving an older car, the cost of repairing the car can quickly exceed the worth of the car. In that case, an insurer will “total” the car and pay you what the car was worth rather than fixing it. In severe cases, the worth of the car might not exceed the premiums paid for the coverage.

Comprehensive Coverage

This coverage will pay for almost all other damages to your vehicle including, theft, vandalism, severe weather, flood, fire, the hitting of an animal and glass including your windshield. This coverage isn’t as expensive as collision coverage and is chosen by many consumers. This coverage is also optional and not required by law.

When considering collision and comprehensive coverage, you should consider your deductible. A deductible is an amount of money you agree to pay as part of a claim before the insurer is committed to pay the rest of the claim. For example, if you carried collision coverage with a $200 deductible and you had a $500 loss, you would have to pay $200 and the insurance company would have to pay the remaining $300.

Basically, deductibles reduce your premiums because you agree to deduct a set amount from the claim your insurer otherwise would have to pay. Insurance companies offer deductibles because they reduce the number of small claims, which are costly for them to handle.

If you purchase a new car with a loan, the financial institution that loaned you the money might require you to purchase comprehensive and collision coverages. This is because they see your car as collateral for the loan, and they want to make certain it is worth something if they need to repossess it.

In the event you have to buy, or decide to buy, collision or comprehensive coverage, you can save money by agreeing to the highest deductible you can afford to pay in the event of an accident. However, because comprehensive coverage is usually cheaper than collision coverage, many people save money by dropping the collision coverage and keeping the comprehensive coverage to protect against natural perils, theft and glass breakage.

Tags: Auto

Popularity: 7% [?]