Minimums

• Most states require at least liability insurance at the minimum. Liability insurance pays for the damages you do to other people and property when an accident is your fault. Find out the requirements in your state for car insurance (see Resources).
  
  

Types

• The different types of car insurance are liability, collision, comprehensive, medical, uninsured or underinsured and personal injury protection (or PIP). Liability pays for damage to other people's property in the event of an accident; collision pays for damage to your car from an accident; comprehensive covers types of damage that a car may incur when you are not driving it (such as theft and vandalism); medical covers medical costs from an accident; uninsured or underinsured pays for your damages if the other person does not have insurance or does not have enough insurance; and PIP covers medical expenses from an accident regardless of who is at fault.
  
  

Significance

• Car insurance protects people when they have an accident. The costs of fixing a car due to a high-speed collision can be enormous. The car may be totaled, which means another car must be purchased to replace the car that was destroyed. Even when the crash is a minor fender bender, the costs can still amount to several hundred dollars. Medical costs can run tens of thousands of dollars if the person has to go to the hospital due to the accident. If the person dies because of the accident, the family may sue the other driver, and if he loses in court he must pay the amount the court awards the family. Without insurance, the person responsible for the crash would have to pay these costs out of his own pocket. Insurance pays all of these amounts up to the limits of the policy.
  
  

Costs

• Insurance has two parts to pay. The first part, the monthly premium, is determined by several factors including the person's age, driving record and age of the car. The other part is the deductible. The deductible is the amount that a person must pay before the insurance pays for his claim. The higher the deductible, the lower the monthly premium, but if you do choose a high deductible and you have an accident, you must pay the amount of the deductible. Most insurance policies offer a choice for amounts of the deductible. Go over the options with your insurance representative for the best monthly rate, deductible and coverage for you.
  
  

Benefits

• Car insurance benefits all persons, even safe drivers. Some states have a no-fault policy, which means that in the event of an accident, each insurance company must pay a portion of the bill no matter who was at fault. Safe drivers also benefit by having comprehensive car insurance. If you car is vandalized, or if severe weather, such as hail storms or tornadoes, causes damage to your car, your insurance policy will cover the repairs of your car.