Before you can drive legally in most areas, you must set up an auto insurance policy that complies with local laws. Each state has its own requirements for car insurance coverage. Most of these requirements pertain to liability insurance, but there are some variations. It is important to understand the requirements in your area before you set up coverage to ensure that your coverage complies with the law. Liability insurance is usually broken down into property damage and bodily injury components. Generally, liability insurance compensates other parties if you caused the accident. Property damage liability insurance pays for their vehicle repairs or a replacement, and it may pay for other types of property damage expenses. For example, if you ran your car into someone’s house, it would cover their home repairs. Bodily injury liability insurance, on the other hand, pays for medical bills if you injure someone else.
Remember that liability insurance will not pay for your own expenses. Collision and comprehensive coverage are two additional types of auto insurance that you can consider adding to your policy. Some auto lenders even require one of these additional coverage types. Collision insurance pays for auto repairs to your own car only if the damage was caused by a vehicular collision. Comprehensive insurance offers this same type of coverage, and it expands on it. For example, it also pays for repairs or a replacement to your car if it is damaged by fire, bad weather and many other types of events. Other optional coverage are for towing services, rental car services, personal property, personal injury and more.
When you set up an auto policy, you have the ability to choose your coverage types, coverage limits and deductible. Remember that you are still financially responsible for expenses that exceed your coverage limits. With this in mind, it is sometimes beneficial for drivers to consider increasing limits. You can adjust coverages, limits and the deductible to create an affordable policy that is as protective as possible for your needs. It is wise to review and update your coverage as needed annually so that it continues to meet your needs.