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Protect Your Car: Auto Insurance

Buying a vehicle is only the first step in auto ownership. Now that you have your very own set of wheels, it’s important to safeguard yourself against hefty bills that add up in the event of an accident. By choosing an auto insurance policy that’s right for your needs, you can do just that. 

To help you along the way, following are the three things every auto owner should know about insuring his or her car:

  1. Know the different types of coverage. A full-coverage auto policy includes the three types of coverage that usually are required when a dealer or bank is financing your car loan. These include:
  • Collision—covers repairs or the replacement of your car after an accident
  • Other than collision—protects you from damages caused by nature, theft, fire, or vandalism
  • Liability—pays for injuries and property damage you may cause in an accident (Drivers of older cars often opt out of full coverage and only carry liability.)
  1. Understand your state’s requirements. Each state sets its own minimum liability coverage requirements for auto insurance. (This map from the National Association of Insurance Commissioners provides links to state insurance departments.) The three categories of liability insurance are:
  • Bodily injury to one person in an accident
  • Bodily injury to all persons in an accident
  • Property damages
  1. Learn how to cut costs. Auto insurance generally is more expensive for drivers under 25 years of age because statistics show younger drivers are at greater risk of being in accidents. But here’s what you can do to help trim costs:
  • Ask about discounts, such as those for driving a car with air bags, antilock brakes, or security systems; for taking driver education classes; for maintaining a high grade-point average; or for maintaining a clean driving record.
  • Choose a higher deductible (the amount you must pay in the event of an accident before insurance begins covering bills), which can lower your overall policy cost. Just make sure you have enough in savings to meet that high deductible.
  • Shop around and take the time to compare auto insurance policies that are available through different providers.

The bottom line: Research your options, choose a policy, and scoop up as many discounts as you can.

Now that you know the basics, you can graduate from auto owner to responsible auto owner. Knowing you have the policy that’s right for you means you can spend more time enjoying your ride and less time worrying about protecting it.

(Any reference to a specific company, commercial product, process, or service does not constitute or imply an endorsement or recommendation by CashCourse or the National Endowment for Financial Education. These courses and related resources may be used only for nonprofit, noncommercial educational purposes. CashCourse makes every effort to keep the information in these courses current, but, over time, new developments as well as legislative and regulatory changes may date this material. If you discover inaccurate information, please contact us.)

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