Three types of coverage Although insurance policies and prices vary from company to company, there are three basic types of coverage you'll want to consider.
Liability: If an accident is your fault, the insurance company will usually cover the damage you caused, including bodily injury and property damage.
Collision: The insurance company will pay for repairs performed after an accident. Make sure you go to a repair shop approved by your agency. Otherwise, they may not pay for the work.
Comprehensive: Damage from vandalism, theft, floods, fires and other events is covered. Some insurance agencies don't cover certain kinds of mishaps, so make sure you know all the details -- and exclusions -- of your policy. Some insurers offer protection from uninsured drivers.
Other important considerations:
Find out your auto lender's preferences. If you owe money on your car (through your loan), your lender may have some rules on the kinds and amounts of coverage you'll need. Most lenders want a comprehensive coverage package to protect the car in the event of an accident. However, if you own your car outright and have the title, you are free to select the insurance you feel most comfortable with, as
long as you comply with state insurance requirements.
What's the smart amount of coverage for me? Figuring out how much time you spend in your car and the number of hazards that your car faces on a regular basis (traffic, parking, etc.) can help you figure out the coverage you need. If your car is frequently exposed to hazardous conditions, you may want to consider adding more coverage. If you keep your car in a garage most of the time, you probably don't need as much coverage as someone who's parking on congested city streets every day.
Your insurance agent will ask you about your driving habits. Based on data from thousands of insured drivers, the agent can figure out the likelihood of you having an accident and offer a plan that is appropriate for you. Some insurance companies will reduce your payment if you drive less frequently, live close to work or if you drive a safer vehicle.
You should also consider where you live, work or go to school. Are you concerned that your car may get stolen or vandalized? Weigh all these things when choosing your insurance plan. You can easily increase your coverage if necessary.