Analyzing car insurance needs

Automobile insurance covers repair bills and protects you from having to pay costly medical bills for yourself or for others following a car wreck. It also can protect you against car damage resulting from acts of nature (such as hail damage), or in cases where another driver hits you and does not carry sufficient insurance to cover your medical or repair bills. Each state sets its own requirements for car insurance.

Full coverage auto policies include the components of collision, "other than collision," and liability insurance.

• Collision insurance covers repairs or replacement of your car following an accident.
• "Other than collision" insurance protects you for damages caused by nature, theft, fire, or vandalism.
• A full coverage policy is usually required when a dealer or bank is financing your car loan.

People who drive older cars often decide to opt out of full coverage and only carry state-required liability insurance, which is described below.

State liability requirements
Almost all states require you to carry a minimum amount of liability coverage in the following three categories.

• State minimums for bodily injury to one person in an accident range between $10,000 and $50,000 of coverage.
• State minimums for bodily injury to all persons in one accident range between $20,000 and $100,000 of coverage.
• State minimums for property damage coverage ranges between $5,000 and $25,000.

It is important to be aware that you may be liable for more in damages that you cause than your policy covers. If you destroy a Mercedes SL550, your state's required minimum may leave you paying for the damages for years. However, if you have no assets, the other driver may just be out of luck.

Some states have "no-fault" insurance. A no-fault policy pays medical bills for injuries and property damage you suffer in an auto accident regardless of who caused it. No-fault laws were passed in an effort to reduce auto injury fraud and keep insurance costs down. Other states have mandated "uninsured" or "underinsured" coverage to protect you if you are struck by a hit-and-run driver, or by someone who doesn't have car insurance.

Adjustments to car insurance premium prices
When comparing companies, keep a notebook to record information about the following pricing factors. Any of them can increase or decrease the amount you pay for your auto insurance premium.

• Discounts: Some companies offer "good student" discounts for maintaining a high grade point average on the assumption that better students are better drivers. Insurance companies also grant discounts when you drive a car with air bags, antilock brakes or security systems, or after you have taken driver's education classes.
• Age: Car insurance is generally more expensive for college students because statistics show that drivers under the age of 25 have a greater risk of being in an accident.
• Driving record: Traffic tickets will drive the price of your car insurance premium higher.
• Driving patterns: Insurance companies ask how much you drive each day and when.
• Vehicle type: High-profile sports cars are more expensive to insure, as are cars that are targeted by thieves because they are easier to steal.
• Additional drivers: If your spouse or another driver is added to your policy, their driving record will be factored into your premium price.
• Deductibles: Choosing a higher deductible (the amount you must pay before insurance payments kick in) can lower your premium cost.