Auto Finance Insurance

Understanding Auto Finance Insurance

Having auto insurance is not only a good idea to protect yourself and your car in case of an accident, in many states it's required. When applying for auto insurance, you're generally asked how much liability coverage you want, if you want collision and comprehensive, how much of a deductible you want, and if you want any types of optional coverage. Make sure you understand what these terms mean and how much coverage is right for you.

Your coverage options

Collision and Comprehensive coverage
Collision and Comprehensive pay for damage to your auto. You can purchase either or both of these for each vehicle you own. If you have an auto loan you may be required to purchase both.

• Collision coverage – insures you against damage to your vehicle caused in an accident.
• Comprehensive coverage – insures you against all other physical damage to your car caused by such events as fire, theft, flood, and vandalism.

This coverage is normally purchased with a deductible (generally, anywhere from $100 to $1,000). If your auto is damaged, the insurance company pays only for the damage in excess of the deductible you selected. The higher the deductible, the lower the premium.

Liability coverage
Liability coverage pays for injuries you cause to other people and damage you cause to other people's property in an automobile accident.

Medical payments coverage
Medical payments coverage pays medical expenses (up to a specified dollar limit) for passengers of your car who are injured in an automobile accident. If you and your passengers have health insurance, you may not need this coverage.

Personal injury protection
Some states require personal injury protection, also known as no-fault coverage. This coverage pays for medical expenses for passengers of your car who are injured in an auto accident. It also pays for loss of income if you are injured in an auto accident and are unable to work.

Uninsured/Underinsured Motorist coverage
This coverage pays for bodily injury to you caused by another person who is completely uninsured or who has less than adequate liability insurance to cover your injuries.

Optional coverage
Optional or special coverage includes extras such as towing, rental reimbursement, and roadside assistance. None of this coverage is required.

How much do I need?
Choosing the appropriate level of coverage depends on a number of factors, including assets you must protect (liability coverage), value of your vehicle (collision and comprehensive), the amount of money you can afford to pay out-of-pocket (deductibles), and your tolerance for risk.