Nobody likes to buy car insurance. Every state has a minimum amount of coverage required, and in this tough economy that’s exactly what most people settle for: the bare minimum. If one has to decide between food and adequate car insurance, food always wins.
Guess what? The minimum is all you really need. Let’s qualify that statement, though; you just need the bare minimum of the right type of insurance.
I love auto insurance commercials that feature a mom or dad holding a child, talking about how important it is to protect the most valuable things in their lives. This is of course a good idea. But it has nothing to do with car insurance.
Auto insurance is intended to compensate you for a loss that occurs as a result of something for which you are at fault (comprehensive and uninsured motorist coverages are exceptions). Think about it. If your car is damaged as a result of someone else’s negligence, your insurance company will pay for the damage. Auto insurance is about protecting yourself from your own mistakes.
An auto insurance policy is essentially two different types of insurance. The first type is insurance that indemnifies you against loss due to damage to your vehicle. This vehicle damage insurance is also divided into two types of coverage: Collision and Comprehensive (also called Non-Collision).
Collision insurance is coverage for damage to your vehicle that results from an accidental collision with another object, such as another car or a utility pole in a parking lot. It is designed to cover the costs of repairing the damage you caused to your car. Comprehensive insurance, also called Other Than Collision (because it’s not “comprehensive”), is coverage for damage to your vehicle that is due to something that is no one’s fault, such as hail damage, the fall of a branch of a tree or an animal. running in his car.
The other type of insurance in a car policy is liability insurance. This type of insurance is designed to pay for expenses that result from physical injuries that occur to people who are injured due to their driving error. There is also a provision in the Liability portion of the policy for coverage of expenses incurred due to damage you caused to someone else’s property.
Recalling the principle that only catastrophe insurance should be purchased, we must now distinguish between these two types of car insurance. Which is designed to cover a loss that is a painful financial setback, and which covers a loss that is a catastrophe?
Unless it’s the other way around, owing more on an expensive vehicle than the vehicle is worth; Liability coverage is the only protection that covers you against catastrophic loss. The surprise is that liability protection costs much less than collision coverage. You can increase your deductible on your collision protection, increase your liability coverage, and still have a lower auto insurance premium than what you’re currently paying.