If you drive a vehicle, you know you need auto insurance. However, as with most types of insurance, auto insurance is complicated and comes in many forms. If you want to best protect your car and your finances, check out these three commonly asked questions about auto insurance.
1. How Much Insurance Is Legally Required?
Each state requires you to have some auto insurance, and while the rules vary from state to state, in most cases, you need to have a minimum of liability insurance. Liability insurance will cover the costs of medical bills and damages for the other driver in the event you cause an accident.
The exact cost of liability insurance depends on many factors, such as the type and age of the vehicle. However, you can expect to spend about $500 a year on liability insurance premiums.
2. What Other Types of Policies Exist?
There are many other types of policies, but because they are all more robust than liability insurance, they are more expensive options. Collision coverage is similar to liability insurance, except it covers your damages after an accident. Similarly, a medical payment coverage policy pays for your medical bills after an accident.
Comprehensive coverage provides protection against other types of damage, such as theft, fire, vandalism, etc. As long as the peril is covered under the policy, you should get reimbursed for damages. Both collision and comprehensive policies are usually optional choices, but you may be required to purchase these policies if you are still paying off the car (or leasing the car).
3. Do You Need Gap Insurance?
New cars depreciate fast. This is why a used car that is only a year old can be drastically less expensive than a brand-new model. In most cases, the depreciation won't destroy you, but if your car is totaled, you could face expensive consequences.
For example, perhaps you still owe $40,000 on your car loan, but your car has been totaled. The insurance carrier will not give you the $40,000 you still owe; they will give you the current value of the car. Unfortunately, thanks to the depreciation, you may only get half of what you need to pay off the car loan on the totaled car. Plus, you still have to buy a new vehicle.
Gap insurance provides protection against this by filling in the gap between the value of the car and the amount of the loan. The best part of gap insurance is that if you end up selling the car, you can get reimbursed for the gap insurance you paid.
Driving a vehicle is a lot of responsibility. Besides being a safe and responsible driver, you need auto insurance to protect you and others in the event of an accident. If you would like to know more, contact an auto insurance provider in your area today.Share