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Auto Insurance

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Auto insurance is a requirement of car ownership today. Also known as car insurance or vehicle insurance, auto insurance safeguards drivers not only from having to pay for extensive repairs to the vehicle itself, but also covers damage to other people's property in the event of an accident.

Types of Auto Insurance

Auto insurance comes in many variations and with many different conditions. All policies can be classified into the following three types of insurance:

Collision coverage:
  • Pays for repairs or replacement of your vehicle if it is damaged by a collision
Comprehensive coverage:
  • Pays for repairs or replacement of your car if it is damaged not only by a collision, but by any other circumstances. This includes fire, vandalism, theft, and so-called "acts of God" - lightning, a fallen tree, flood, and other natural disasters.
Liability coverage:
  • Covers the repair, replacement, or medical bills for any damages incurred to other people or property, including injuries or death of any third party.

Why Do I Need Auto Insurance?

In most states, auto insurance is required by law if you own or drive a car - not to protect you as the driver, or your passengers, or even the vehicle, but to protect other people if you happen to be involved in an accident in which someone is injured or killed, or property is destroyed.

Liability insurance is mandated by most state governments, although each state requires a different minimum amount of liability (ranging in most cases from $20,000 to $100,000). New Hampshire does not require liability insurance at all, and Virginia allows motorists to decline liability insurance if they are willing to pay $500 annually to the state for each uninsured vehicle. Bear in mind that in most cases, the minimum required by the state is not enough to cover the actual damages of a serious accident - and anything exceeding your auto insurance coverage must be paid out of your pocket.

While liability insurance is required by most governments, collision and comprehensive insurance are optional. The decision to purchase this extra coverage is left up to the auto owner or driver.

Cheap Auto Insurance

Although it's a good idea, for obvious reasons, to get both comprehensive and collision insurance on your vehicle in addition to the required liability coverage, the easiest way to reduce the cost of auto insurance is to eliminate one or both of these coverage types.

It's also possible to get inexpensive auto insurance by increasing the deductible on one or both types of coverage - but keep in mind that the higher your deductible, the more you'll have to pay out of pocket in the event of an accident. A higher deductible will mean lower premiums, but may cost you more in the long run in the event of a wreck.

Getting discount auto insurance may mean cutting down on your coverage by buying only the minimum required liability insurance, although this is generally a short-sighted choice and can result in significant out-of-pocket costs if someone is injured in an accident.

The best way to find affordable auto insurance is to shop around and compare rates between different carriers and insurance companies. There can be a big difference in rates between the well-known and discount insurance carriers. You may also be able to cut costs by combining your auto and homeowners insurance plans with one company, or by inquiring about group rates available to those in your field or alumni from your college.

High-risk drivers will find it all but impossible to get cheap or discount rates on auto insurance. For drivers with a history of accidents or speeding tickets, it may be possible to lower their steep rates if they maintain a clean driving record for several years. A state-approved driving class can also help lower premiums for a driver with a less than perfect record. It's always a good idea to ask your insurance company about special discounts that may be available.