This is the first step to take when buying auto insurance

Image source: Getty Images.

Every driver must have car insurance. But there are a wide variety of coverage options, and motorists must decide both what types of insurance to buy and how much coverage to get. It can be complicated, but there’s one simple step every auto insurance buyer should do first.

This step is crucial in taking out car insurance.

The very first step that every motorist should take when buying insurance is to understand what coverage is required.

There are rules in each state that set certain minimum coverage requirements. Most states require drivers to carry liability insurance, which provides payments to accident victims if the covered driver injures them or damages their property by causing an accident.

Other types of coverage required could include personal injury protection that pays the policyholder’s bills after an accident, as well as uninsured or underinsured motorist coverage that pays the policyholder’s bills. if his vehicle is damaged in an accident caused by someone else with too little insurance.

Drivers must purchase at least the minimum amount of coverage that their state mandates or they could be ticketed and cited for not having the required coverage. And drivers who have auto loans or lease vehicles may also have additional mandatory coverage that they must purchase because their lender requires it. This could include, for example, gap insurance that pays the difference between the value of the car the insurer will pay after an accident that destroys the vehicle and the amount the driver owes on the loan or lease of the car.

By finding out what coverage their state and lender require, drivers can ensure they are fully complying with the rules by purchasing enough coverage to comply with mandates.

Is the purchase of mandatory coverage sufficient?

Purchasing the minimum amount of auto insurance required by a state and a leasing company or loan company is just the first step to getting the right auto insurance coverage. Although this is the most important step due to the disastrous consequences of not doing it, most drivers should not limit their coverage to what is mandatory.

This is because there are many types of optional coverages that can provide vital protection for a driver’s assets. For example, states generally do not require comprehensive coverage that pays for other damage to the policyholder’s car not caused by an accident, such as repairs needed if a tree falls on the vehicle. Collision coverage, which pays for the repair or replacement of a car if the policyholder causes an accident, is also not required by state law.

While most lenders require collision and comprehensive coverage, there are additional protections drivers may wish to consider that go beyond what their loan provider wants them to purchase. For example, it might make sense to purchase rental car coverage so that the insurer covers the costs of renting a vehicle while a car is being repaired after an accident.

Ultimately, drivers should obtain the minimum coverage and then consider the other protections available so that they can make a fully informed choice about the level of risk they are willing to take on – and the risks they should transfer to a insurer, so a problem with a vehicle does not lead to financial disaster.

The best credit card cancels interest
If you have credit card debt, transferring it to this superior balance transfer card can pay you 0% interest for 18 months! It’s one of the reasons why our experts rate this card as a top choice to help you control your debt. This will allow you to pay 0% interest on balance transfers and new purchases during the promotional period, and you will not pay any annual fees. Read our full review for free and apply in just two minutes.

We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Previous Coupon App Provider Ranking Sees Competitors
Next Teenager's sudden death, payday loan rage and concern over collapsing Liverpool markets