If you have a driver’s license then you undoubtedly also have a form of car insurance. A lot of us probably have been on our parent’s car insurance plans for a while, and we let them just handle it. The first time you actually go out on your own and get your own car insurance, you likely will be overwhelmed with options. Liability? Comprehensive coverage? Road side service? Should you get a higher or a lower deductible? Choose wrongly and you could be on the hook for owing a lot of money. Let’s break it down:

Your insurance will ultimately kick in when you have an accident. Your coverage options depend on whether or not you are at fault in the accident. Who is at fault is either decided by the parties involved (one party “confesses” and accepts fault) or by a law enforcement officer. Quick note, never admit fault when you get in an accident, by doing so you might later find yourself having to pay up. When you’re not at fault, the at fault party’s insurance will pay your medical bills and for your car to be repaired. When it unfortunately is your fault, you’re faced with two coverage options, Liability or “Full Coverage”.

• Liability: This type of insurance is the basic level, it’s what you’re often required by law to hold. It firstly covers bodily injuries; medical bills for the person you injured as well as lost wages and compensation for pain and suffering. It then will cover the cost to replace the damaged goods, their car, house or occasional light poles.
• Full coverage: Full coverage is not an actual insurance term but basically implies that when it’s your fault in an accident, the insurance company will fix your car/property as well. It comes in two flavors (each with their own additional costs). The first is collision, which means that they’ll fix your car. When I wrecked my beautiful Mustang a few years back (and learned the valuable lesson that it speeds up much quicker than it slows down), I had collision as well as liability. My insurance company paid to fix the car of the guy that I hit and my own car. As anyone who’s ever had body work done knows, it’s not a cheap thing so I certainly was glad to have that coverage. Secondly there is comprehensive. This will vary from policy to policy but covers: break-ins, someone stealing your car, fires, vandalism, water damage, and collisions with animals (they don’t often carry insurance to pay for the damage…).

Ultimately you’ll have to weigh out the cost/benefits of the additional coverage. For those of you with newer cars (once again, please read the article ‘Why you should never buy a new car‘ for more insight), y’all might want to have the additional coverage. Getting your car fixed can easily be several hundred dollars, creeping on up into the thousands. For those with older cars that you don’t care as much about, a little dent here or bang there isn’t that much of an issue, you could go without fixing that. Or some people just have some money set aside for emergencies such as this and will save paying the extra money to the insurance company and in case of an accident will have money to pay to fix their car.

Two quick terms you should know:

• Premiums: This is the amount you’ll pay for the services. Often insurance policies are written for 6 month periods and you can pay it up front (and get a discount) or pay it monthly. The more services (collision and comprehensive or higher coverage limits) you get the more you’ll pay.
• Deductible: In the event of an accident, before your insurance pays their part to fix your car/property you’ll have to pay a lump sum. I for instance have a $250 deductible. If I was to cause an accident tomorrow (knock on wood I don’t…), I would have to pay $250 before my insurance company would pay to get my car fixed. The higher the deductible, often the lower the premium.

I can’t really give any recommendations as to who to get insurance with (they all swear they’ll save you at least $400) or what amount of coverage to get. Accidents certainly happen, even to the safest of drivers. I personally found that covering my vehicle with “full coverage” was only an additional $180 every 6 months. I figured that I could afford that coverage. Insurance reps will often try to up sell you on additional coverage; roadside service, rental cars or higher coverage limits. Do some thinking and figure out if you think that the additional costs are worth the additional peace of mind. Who covers you doesn’t really matter until you need them!

Thanks for reading my article, I hope you enjoyed it! Please consider sharing it on Facebook and or Twitter! Here are some other articles I think that you might be interested in:

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