Car insurance comes in many forms and prices and coverage can vary from state to state and from one insurance company to another. Basically, liability insurance is mandatory for every driver in order to be legally permitted to drive. Liability insurance covers damages to another person's property or injuries to any other driver, passenger, or pedestrian. The minimum limits of liability required also vary from state to state. There is optional coverage that drivers may choose to purchase. Some optional coverage includes physical damage coverage, which comes in two different forms.
Collision insurance provides coverage for physical damage to a driver's vehicle if they hit an object, person, or other vehicle. This coverage is available regardless of who is deemed to be responsible for the accident. In order for the insurance company to pay for any incurred damages, the driver or policy holder must first pay a deductible.
A deductible is a set amount determined when the car insurance policy is first issued. The higher the amount of the deductible, the lower the premiums will be. This may be a great incentive for a driver to increase their deductible; however, they must keep in mind that the deductible amount should still be affordable. If it is too high and the driver does not have the means to pay, then the repairs will not be initiated. If the accident is the fault of a third party, their insurance company will have to pay for this amount.
Another type of car insurance that will provide coverage for physical damage is comprehensive insurance. This comes into play if a driver's vehicle is damaged due to such perils as fire, theft, or vandalism. Again, there is usually a deductible involved that must be paid before the insurance company will agree to pay for the damages.
Because physical damage insurance is optional, drivers should determine if this coverage will be beneficial to them. New vehicles that are being leased or financed must carry this insurance; it is required by the financial institution that is providing the vehicle loan. Even if a new vehicle isn't financed, it is still a good idea to carry this insurance. Older vehicles; however, may not require physical damage insurance. The premium and the deductible may prove to be more costly. When a vehicle is in an accident, the insurance company will review the claim and determine if they will repair the vehicle or deem it a total loss. If the cost of repairs is higher than the vehicle's worth, then the insurance company will not authorize it to be fixed and will instead issue a check for the value.