Many of us spend valuable time and energy researching, test driving, and discussing car options before we buy a car that best meets our needs and budget. We should expend the same time and effort learning about auto insurance policies to meet our driving and budget needs. If we do, we will keep from spending unnecessarily on coverage we do not need to have, and will help us be certain that we have what we do need before something bad happens.

If you want to be able to select the right coverage (and coverage amount) and still keep your premium within your budget, it is important to first understand Auto Insurance 101. The following six terms found in the average auto insurance policy will provide you with the information you will need when you shop for auto insurance.

Liability

This clause protects you if you should be found at-fault in an accident that results in harm to a person and/or their property. Each state has its own liability regulations, so find out what is required where you live.

This coverage is usually divided into limits (i.e.$100,000/$300,000). In this example, the breakdown would be as follows:

• The auto insurance company would allocate up to $100,000 toward any individual’s medical expenses.
• The policy would cover an additional $200,000 for all medical expenses for everyone in the accident, for a total not to exceed $300,000.

Keep in mind that liability coverage will not pay for injuries or damages to your car.

Property Damage

This refers to the total amount that your car insurance policy will cover for any property damaged in an accident that you are judged at fault for.

A large number of auto insurance policies have a maximum property damage limit of $100,000.

Comprehensive

This type of insurance coverage covers damage to your car incurred for reasons other than collision, such as theft, hail, fire, and/or vandalism. Comprehensive coverage is mandatory (in most cases) as long as you have a lien against the car.

Comprehensive coverage typically has a predetermined deductible attached, and the cost of the auto insurance policy goes down in correlation with the deductible rising.

Collision

This coverage compensates you in cases where an at fault accident results in damages to your own car. If your car is totaled, the auto insurance company will reimburse you for the actual cash value of the car. The cash value amount does not always equal the remaining balance on your auto loan. When purchasing a new vehicle, ask your agent about “gap” insurance that covers this difference in cost.

Just like comprehensive coverage, collision coverage is mandatory when you finance your vehicle purchase with any finance company.

Uninsured/ Underinsured Motorist

Uninsured/underinsured motorist coverage offers you coverage in case of an accident that is not your fault but the responsible party either has no auto insurance or not enough. Statistics have proven that there are literally thousands of drivers who do not have auto insurance, so it is a very smart idea to protect yourself.

Whether you have a policy and are looking to change companies or intend to buy a new/used vehicle, you must understand the fundamentals of auto insurance so that you can have peace of mind when you pay your premiums monthly, semi-annually, or annually.

Now you know just how easy it can be to find the right insurance policy for you, so request your free Phoenix auto insurance quote now!