Liability insurance is required by law. In the event of an accident where the insured is at fault, liability insurance covers only the other party(ies) involved. The insured vehicle damage or replacement is not covered. Liability insurance is the least expensive insurance to carry. I recommend this insurance to those who’s car is old, free and clear of debt, doesn’t hold much value, and who has the money to purchase another vehicle should the need arise.

Collision insurance covers repairs or replacement of your vehicle(s) when involved in an accident. This type of insurance is subject to a deductible (the amount set by the policy that is required by the insured to pay out of pocket prior to the insurance company paying out.) For example, if your deductible is $1000 and you are involved and responsible for a slow speed collision that damages your bumper and the cost of repair is $700, you are responsible for the $700. Should the damage be $1750, you would be responsible for the first $1000 and the insurance company is responsible for the remaining $750. The lower the deductible, the higher the premium, or cost of the insurance.

Comprehensive insurance covers repairs or replacement of your vehicle(s) should it be stolen, vandalized, or damaged by fire or weather. Comprehensive insurance is also subject to a deductible.

When financing or leasing a new/used vehicle from a dealership, it is usually required by contract to purchase and maintain collision and comprehensive insurance. This is as much for the financing company as it is for the insured.

Personal injury and medical payments protection covers medical bills and loss of wages due to an accident. These protection plans are generally covered by comprehensive insurance and are subject to limits based on the type of policy you carry. These limits are split into to categories: the maximum amount paid per person and the maximum amount per accident. The higher the maximum, the higher the monthly premium.

Uninsured motorist coverage is an optional plan that protects the insured against loss if involved in an accident with a party (who is at fault) that does not carry insurance. The insured’s company would cover the cost that would normally be covered by the other party’s insurance.

Gap insurance us usually bought when a new car is financed. It is general knowledge that a vehicle looses value once driven off the lot of a dealership. Gap insurance covers the difference between the vehicles cash value (as usually determined by Kelly Blue Book) and remaining debt. I personally purchase gap insurance for all of my new vehicles, especially those in which I did not put a large down payment on.

The cost of insurance varies depending on what type of coverage (liability, collision, or comprehensive), additional protection plans, the amount of the deductible, and the maximum amount of coverage you choose. Other factors of pricing include age (younger drivers usually pay more), marital status (married couples usually pay less), driving record (better/clean driving records pay less), type of vehicle (recreation vehicles, sports/muscle/sport utility cars pay more), and distance driven. Insurance companies also offer discounts to help keep customers and entice new ones. Some include good driver discounts and multiple vehicle discounts.

With so much to choose from and many variations of each types of coverage and limits, it is recommended to research different companies and get quotes. The insured needs to take their needs and finances into consideration before choosing the best insurance company and policy to fit their needs.