Auto Insurance Explained

Number one most important thing to consider as you shop for an auto insurance policy?

Auto insurance comes as a package of different coverage options.

The Number two most important thing to know in your auto insurance hunt?

Your package of coverage options needs to meet your state’s minimum auto insurance requirements for each type of coverage. And each state’s got different minimums that need to be met.

What else should you know about auto insurance?

If you're interested in a car insurance policy that will definitely offer you a comfortable level of protection from lawsuits or from hefty car rental, towing or labor bills, you’ll need to choose from among the available slate of riders and attachments.

Don’t worry: It’s not as complicated as it sounds. Here are the basics you need to know to help you shop for the best auto insurance policy.

The 6 basic components that make up an auto insurance policy

1. Bodily Injury Liability: Bodily Injury coverage is generally required by most states. Put simply, it provides coverage for any injuries you cause to someone else.
2. Property Damage Liability: This is another coverage type that will generally be required by your state. It covers any damage you cause to someone's property.
3. Personal Injury Protection: Better known as PIP Insurance. PIP provides for the treatment of injuries to the driver and passengers of the policyholder's car.
4. Collision Coverage: Collision is typically an optional auto policy component that covers any damage to your car that’s the result of a collision.
5. Comprehensive Coverage: Here’s another optional coverage type that will protect you in the event that there’s any damage to your car that didn't involve a collision. (Theft, fire, vandalism, etc.).
6. Uninsured Motorist Coverage: Uninsured motorist is one more component of auto insurance coverage that will probably be required by your state. It offers you protection if you’re injured in a collision with a driver who’s either uninsured or insufficiently insured.

The 3 common car insurance add-ons and riders

There are also, as mentioned above, a number of available supplemental auto insurance coverage options. The 3 rider types listed below are commonly available as add-on premium items and a good idea if you think you might need extra protection.

1. Rental Reimbursement Coverage: This is a fairly common rider that will cover you if you need to rent a vehicle to replace yours if it is damaged or stolen.
2. Towing and Labor Coverage: Basically a stand in for AAA, a towing and labor rider covers your out-of-pocket costs in case of a flat or any other breakdown.
3. Gap Auto Insurance Coverage: Perhaps better known as an “Umbrella Rider,” a gap insurance add-on will pay out the difference between the actual cash value of your car and whatever amount is left on your auto loan if your car is totaled by an accident.