Car Insurance Basics

Car Insurance Basics

| May 04, 2020
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In most states, car insurance is required to drive on public roads, particularly liability insurance. If you are just starting out, it can be confusing on what coverage you need and what coverage you may not need.  Having a local insurance agent can be insightful in helping you select the insurance protection that is right for your lifestyle and your budget. 

The Basics:

We're going to look at the basic car insurance coverage, a brief definition of the coverage, and include a real example of how the coverage would be used. 

Comprehensive insurance provides protection on your car if it is stolen, if there is glass damage, if you hit an animal, if your car catches on fire, or even if an object falls on it. 

  • This coverage may be required if you have a leased car or if there is a lien on your car. 
  • If your car is paid in full and you own the title, this coverage is optional. 
  • Depending on the age of your car, this insurance coverage may not be available. 
  • There may be a deductible

Example:  A deer crossed in front of John while he was driving home from work.  John did not jerk the wheel to swerve to try and miss hitting the deer.  There is damage to the front of John's truck.  Comprehensive insurance would take care of the damage to his truck, after his deductible.

Collision insurance provides protection to repair or replace your car if it is damaged in an accident by colliding into another car, running over an object in the road, such as a bucket or colliding with an object like a tree or wall. 

  • If there is a lien on your car or you have a lease, this coverage may be required.
  • This coverage is optional if you own your car out right.
  • Depending on the age of your car, this insurance coverage may not be available.
  • There usually is a deductible.

Example:  Susan was driving to the grocery store, when an oncoming car crossed into her lane.  Susan swerved to miss hitting the car and collided with a telephone pole.  Collision insurance would take care of the damage to Susan's car, after her deductible. 

Deductible is a specified amount of money you must pay out of your pocket before an insurance company will pay a claim. 

  • There are a variety of deductibles available, with the most common $500 or $1000. 
  • Usually the deductible amount is subtracted from the insurance settlement payment. 

Example:  After Ernie's car accident, his car was towed to The Car Repair Shop for repairs.  When his car repairs were completed, the shop called Ernie to make arrangements to pick up his car.  Ernie's Insurance company had paid The Car Repair Shop for the damages.  Ernie would need to pay his part (the deductible he chose was $1000) -- he would need to bring the $1000 payment to The Car Repair Shop before he could pick up his car.

Liability insurance is required by most states for you to drive on the public highways.  When you are in an at-fault car accident with one or more cars, liability provides funds for injuries to people and damage to their cars up to the limit you select.   Common slang for liability is "Street Legal" or "Minimum Limits."  

  • Most states require minimum coverage limits.  An example of minimum limits is $25,000 per person for their injuries, $50,000 per accident for their injuries, and $25,000 for their car or damage done to other property, like a tree or fence. 
  • Liability covers the other person involved in the accident. 

Example:  Yolanda was driving behind her friend, Mark.  Mark stopped for a stop sign, and Yolanda was not paying attention and rear-ended his car.  Her liability limits are $50,000 per person for injuries, $100,000 per accident for injuries, and $50,000 for property damages.  Yolanda's policy would pay up to $50,000 for Mark's injuries, and would pay up to $50,000 for damages to Mark's car and damages to the stop sign. 

Not Alone 

Understanding the basics of car insurance can be daunting if tackled alone -- having an insurance agent to talk through your specific needs and budget can be helpful.  At Consultative Insurance Group, Inc., we utilize a consultative insurance-buying process to help our clients maximize their insurance dollar.  Our team of licensed representatives are available to help make the insurance-buying process easy and educational. 

We are here to help you make informed decisions, give us a call: 800.886.0305, email: or click here to request a no obligation auto insurance quote. 

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