| By :
Marilyn Katz
Almost all of us need to buy insurance in order to operate our vehicles legally and in compliance with our auto loans. However, did you know that there are actually different types of car insurance? The type of coverage that you need will depend upon many different things. It is a good idea to evaluate your own personal situation so you only purchase the coverage you really need. On the other hand, you will not want to skip some valuable coverage so you can protect the investment you have made in your car. Of course, you will have to consider required insurance, your budget, and how much you want to risk. Liability insurance is required for almost all drivers. This is coverage that pays to fix the other guy's car if the accident is your fault. Every US state requires proof of financial responsibility in order to drive legally. For almost everybody, this means that they must have liability insurance. Beyond that required coverage, you may also need collision coverage. This is they type of coverage that helps you pay for repairs to your own vehicle if the accident is your fault. If you owe money on an auto loan, your lender will require it so they can protect their investment. If you own your car, free and clear, you will have to decide if you should keep collision coverage or not. If you do not have an easy way to repair or replace your car if you do wreck it, you may want to consider keeping collision coverage. If your car is not worth much, and you could just pay or get a loan to replace it, you may decide you do not need to keep this extra coverage. There are other things that can damage your car besides auto accidents, though that tends to be the thing we think about the most. Some things that could also damage a car are hail, floods, and theft. Comprehensive insurance covers those other things that could damage your car. If you still owe money on your vehicle, or if it is still new and valuable, you will probably want comprehensive coverage. If it costs more to fix your car than the book value of the vehicle, your insurer may declare your car a total loss. If this is the case, they will only pay you the value of the vehicle. This may not be enough money to fix or replace it, and it may not even be enough money to pay off your loan. These days, with longer loan terms, it is very common for vehicle owners to be "upside down" on their loans. A type of coverage that pays the difference between the vehicle's value and the loan is called gap insurance. It covers the "gap" between book value and the loan balance. In some cases, it may even cover the deductible. Gap insurance can be very useful if you owe a lot more on your car than the book value. Otherwise, you do not need it. We like to think that every driver does the right thing and buys liability insurance as required by law. However, this is not the case. Uninsured motorist coverage will pay to repair your car, if the other guy is at fault, and he or she does not have insurance. Now that you understand a little bit more about the different kinds of auto insurance policies, you can decide which kinds you need to protect your valuable car. Online insurance quotes are a good way to compare local insurers to make sure you get a good deal!
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