Car insurance is essential for every driver. It protects you financially in case of an accident caused by you and covers repair/replacement costs for damaged vehicles.

Most states mandate minimum liability coverage requirements for drivers. This article will give you the essentials of auto insurance so that you can make informed choices when selecting coverage options that are right for you.

Coverage

Auto insurance provides protection from losses incurred from an accident, with your coverage decision impacting its price. Some types are required by law while others are optional – with options including bodily injury liability coverage, property damage liability coverage, collision and comprehensive coverages as well as medical payments/personal injury protection (PIP).

Bodily Injury Liability covers costs associated with injuries you or anyone driving your car causes to others, while Property Damage Liability reimburses others for damage done to their cars or other property such as fences, buildings and utility poles. Comprehensive Coverage pays for physical damage done to your car from fire, severe weather and theft while Medical Payments/PIP provides coverage regardless of who was responsible in an accident.

Unbiased sources such as libraries and state insurance departments offer valuable information about automobile insurance. Your agent should also be available to answer questions and assist in selecting coverages tailored specifically for you.

Limits

Your auto insurance policy limits will determine how much it pays out in claims. While most states mandate minimum liability coverage levels, many drivers elect to increase these limits to further protect themselves against financial hardship.

Insurance providers generally set coverage limits based on the risks they are willing to accept as well as customers’ individual finances and risk tolerance, with cash-strapped policyholders sometimes opting for legal minimum limits in order to save a few bucks on premiums; this leaves them exposed to potentially enormous debt in case of an accident.

Most car insurance policies provide multiple forms of coverage, including collision and comprehensive. Collision coverage reimburses policyholders for damage sustained from collision with another object such as a fence, tree or guardrail; while comprehensive covers damages resulting from incidents other than collision such as theft, natural disasters, fire or vandalism.

Exclusions

An exclusion is a clause in your car insurance policy that removes coverage for certain types of events, usually those not caused by collision between two vehicles. Auto insurers usually have various forms of exclusions available such as Acts-of-God exclusions which cover natural disasters like hurricanes, tornadoes and flooding, but may not cover damage from hurricanes and tornadoes which would fall under comprehensive coverage (if available).

Named Driver Exclusion – To protect two family members from working together to file an accident claim under one member’s insurance, named driver exclusions prevent collusion from two family members to make claims on each other’s policy and increase rates accordingly. This feature is particularly important as insurers often raise rates with additional vehicles added to your policy.

The ISO CGL auto exclusion stipulates that bodily injury or property damage arising from ownership, maintenance, use, entrustment to others, rental/leasing or loaning of certain autos must have occurred for this exclusion to apply. Furthermore, it must have been active at the time of incident for this exclusion to apply.

Discounts

Car insurance might seem costly, but you could likely find discounts to help lower your rates. Talk with your agent about all available discounts such as those for being an excellent driver or taking defensive driving classes; bundling auto and home policies together or selecting paid-in-full options may save money (please be aware that any such discount only applies for the full policy term, typically six months).

Bankrate has identified four categories of car insurance discounts: demographic- or driver-based discounts; driving-based discounts; vehicle-based discounts and loyalty-based discounts. Each carrier may vary on how and when their discounts can be applied and eligibility terms.

Many insurers provide a good student discount for full-time high school or college students with at least a B average. Furthermore, they may provide a student away at school discount that reduces rates for drivers under age 25 who live more than 100 miles away and only use their car during school breaks. Some companies even have telematics programs which give discounts for safe driving by monitoring factors like speeding, hard cornering and braking using apps or devices plugged into cars to monitor things like speeding, hard cornering and braking activity.

Policy changes

No matter your auto coverage situation, it is crucial that you understand what coverage options and limits apply as well as any options or upgrades available to you. Your policy acts as a legal contract between yourself and the insurer; its Declarations Page contains key facts such as coverages, premiums and deductibles along with definitions and an exclusions list.

Many states mandate drivers purchase liability car insurance; other forms are optional. No-fault policies pay promptly on a per-person or capped amount basis for economic losses (medical/health expenses, lost wages and certain reasonable and necessary expenses) regardless of liability; while collision provides up to the policy limit coverage if your own vehicle is damaged during an accident with another car or object.

Additional optional coverages to consider for an auto policy include uninsured/underinsured motorists coverage, which pays for injuries you or your passengers may sustain from being involved with an uninsured driver, and comprehensive car coverage, which covers damage done to your car from other causes (like theft) regardless of who was at fault. It’s essential to understand how different forms of coverage affect premium cost before selecting which policies best meet your needs.