How Does New Car Insurance Work?

When getting car insurance you must first decide what type of coverage you want. The more coverage you get the more your insurance will cost, but the better protected you will be against any accidents. The current types of coverage are:

• Liability- Liability insurance is the insurance that you are required to have in order to drive in the United States. Liability insurance kicks in if you are at fault for the accident. If you ran into a car your liability insurance would pay for the damage you did to that car. It will also pay for any damage you did if you damaged or destroyed property as well as cover any medical costs that the people you were in an accident with may receive. Liability insurance can also cover your court costs in case you are taken to court by the people you were in an accident with.
• Collision- Collision coverage will pay for the amount of damage done to your car. You will receive a check based on the estimate of the cost to repair the car but you can not receive more cash then the total value of the car.
• Medical- Medical coverage will cover all of your medical costs from an accident, whether or not you are at fault. If you are not at fault your insurance company may try and recover the costs from the at faults insurance company. Personal Injury Protection, PIP, can also be apart of the medical coverage. Personal injury protection can cover the cost of wages you lose at work due to your medical condition.
• Uninsured/Underinsured- Uninsured and underinsured coverage will help prevent you from getting into an accident with someone who is not insured. Therefore if you are hit by someone who does not have auto insurance you at least have some coverage, this also goes into affect if you are victim of a hit and run accident. Underinsured covers any extra cost you may have once the at-faults insurance runs out.

Other Types And Additions

There are some minor add-ons you can add to your coverage; this includes rental insurance and towing charges. When you decide on your coverage you will have to choose your premium and deductible. The premium is your monthly payment. Your deductible is how much of the costs of the accident you pay. If your deductible is $500 and the damage to your car was $300, then you are paying for the entire cost of your accident. On the flip side, if your accident cost $2,000 then the insurance company would pay $1,500 and you would pay $500. The insurance company pays for all costs past the deductible. The higher your deductible is the lower your premium, and vice versa.

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