Your Car Insurance Policy Made Simple

Car insurance can seem confusing. Deductibles, coverage, comprehensive, liability-what does it all mean? The best way to keep yourself protected is to understand your car insurance policy. You don't have to become an expert-just take a few minutes to familiarize yourself with the ins and outs of your car insurance policy.

What Is a Car Insurance Policy?

A car insurance policy protects you against financial loss in the event of a car accident, theft, or other unforeseen occurrence. The car insurance policy is a contract between you and your car insurance company; you agree to pay an insurance premium and your insurer agrees to cover losses as defined in your car insurance policy.

Car Insurance Policy Basics

A basic car insurance policy may include several forms of car insurance coverage. Each form of car insurance coverage is priced separately, and not every form of coverage is required. Compare car insurance policies so you purchase the policy that's right for you.

Mandatory Car Insurance Coverages

• Bodily Injury Liability - A mandatory car insurance coverage that financially protects you from injuries you or a covered driver causes to someone else.
• Property Damage Liability - A mandatory car insurance coverage that financially protects you for damage you or a covered driver causes to someone else's property (such as another vehicle, telephone poles, fences, etc.).

Optional Car Insurance Coverages

• Uninsured/Underinsured Motorist Coverage - An optional car insurance coverage that pays for injuries to you, a member of your family, or a designated driver in the event an accident occurs with an uninsured or underinsured driver (or hit-and-run driver).
• Waiver of Collision Deductible - This car insurance coverage is available in certain states and only if you have Uninsured Motorist Coverage. The Waiver of Collision Deductible coverage will pay your Collision deductible if the damage to your vehicle is caused by an uninsured motorist. For example, you have a $500 Collision deductible and you are hit by an uninsured motorist, this car insurance coverage will pay the $500 deductible and your Collision will cover the rest of the damages to your vehicle.
• Comprehensive - This optional car insurance coverage protects you in the event of theft, vandalism or non-collision damage (including fire, earthquake, flood, etc.)
• Collision - An optional car insurance coverage that pays for damage resulting from a collision with another vehicle or object (or damage caused by rollover).
• Medical Payments Coverage - If you have an accident, this car insurance coverage helps pay for medical, dental and/or funeral expenses for you or your passengers, regardless of who is at fault. In those states with "no-fault" type coverage, Personal Injury Protection (called "PIP") covers the basic expenses incurred by the insured or the insured's family in an automobile accident without regard to fault. It is optional in most states.

How Much Car Insurance Coverage Do I Need?

In most states, driving without car insurance is illegal. If you are caught driving without insurance you can be fined or have your driver's license suspended. Even worse, when you do purchase an auto insurance policy, you could be charged a higher rate if you have been caught driving without insurance.

Most states require a minimum level of liability car insurance coverage, but purchasing only the state minimum may not be enough to protect yourself or your assets in the event of a major accident. The Insurance Information Institute recommends at least $100,000 of bodily injury protection and $300,000 of liability car insurance coverage per accident for the average driver. Talk with an attorney or financial planner to determine the appropriate amount of car insurance coverage you need when purchasing your auto insurance policy.

How Is the Cost of my Car Insurance Policy Calculated?

Automobile insurance rates are determined primarily by your driving record, as it most accurately reflects your driving habits. Typically, your age, vehicle make and model, location, credit history, gender, and annual mileage also affect the rate you pay for your car insurance policy. Some states (such as New Jersey) even allow companies to use occupation and achieved education level in factoring rates.

What Is a Deductible?

A deductible is the amount of money you must pay before your car insurance policy will take effect. For example, if your car insurance deductible is $500 and you're involved in an accident in which you were legally determined to be "at fault," you will be personally responsible for $500 of any repairs made to your vehicle. Generally, the higher your deductible the lower the cost of your car insurance premium.

Where Can I Buy a Car Insurance Policy?

One of the best places to shop for a car insurance policy is online. BestInsuranceMatch.com offers a quick, hassle-free way to shop and compare car insurance policies.