(Best Syndication) Auto insurance is one of those requirements for driving a car, along with a valid driver’s license. Although indemnity obligations may vary, every state except New Hampshire requires some sort of policy before you can drive on public roads. In California, drivers may have their vehicle impounded if caught driving without the basic coverage.

Typically, drivers are required to cover the loss and damage to the other car. The obligatory policy protects the “third party” and the financial consequences of their loss, damage or injury caused by your vehicle. Most of the time it is optional to cover your own vehicle against damage. Of course the law may vary according to state, so check with your insurance broker to determine your minimum requirements.

There are a number of factors that determine the insurance rate. Age, driving record and type of car help underwriters calculate the risk to the insurance company and the premium amount. In some instances, the rates may be set by law.

When the premium is not set by the government, insurance companies usually determine the rate from the calculations of an actuary based on statistical data. Since women get in fewer accidents, their cost of coverage may be lower. But if the woman drives long distances to work, this may adjust the rate upward.

Liability insurance covers claims against the specified car owner and those who may drive the car. The coverage may exclude others at the policy holder’s address unless they are added to the policy. The coverage may be car-specific and may not cover the holder if he or she drives another car. Check with your insurance agent before you choose your plan.

The policy will spell out the maximum liability to be paid in the event of an accident. The owner may be liable for ancillary damages caused by the accident. For instance, if the driver hits a power pole, the insurance will pay for the pole but not the loss-of-service claims.

Some policies will cover the owner in a rental car while others may not. When in doubt, you may want to pay the rental company for the coverage when you rent a car. It may be worth the peace of mind.

Collision insurance will cover damages to your car in the event of an accident and it is your fault. When a vehicle is not worth the deductible, it is usually not practical to get this coverage. For instance; if your car is only worth $700 and you have a $1,000 deductible, the company won’t pay you anything if you are involved in an accident.

Comprehensive will cover your damages even if you are not involved in an accident. For instance, if your stereo is stolen, this policy may pay for a replacement. If your car catches on fire or is damaged in a hail storm, you may be covered.

But what if you are hit by someone who does not have insurance? You can get Uninsured/Underinsured coverage (also known as UM/UIM) that will pay you if the other party is at fault and does not have insurance. If the other party does not have enough coverage, this coverage may kick in and pay the difference.

You may be able to get rental coverage with your policy. This will cover rental expenses in the event that your car needs to go into the shop for a covered loss.

Policies can also be purchased to pay off the lease or the loan on the car in the event that your car is totaled. Sometimes referred to as GAP insurance, the policy is practical if you buy a new car.

When a new car is driven off the lot it loses value. Your loan may be worth $40,000 while your car immediately becomes valued at $35,000. If you are involved in an accident soon after your purchase, you could be liable for that extra $5,000. GAP insurance will pay that difference.

There are various types of towing insurance policies. Some policies require you to pay for the towing cost up front and then submit an application for reimbursement. Triple A (AAA) offers great Roadside Assistance coverage because there is no out of pocket expenses.

There is no single policy that fits everyone. Compare the policies and the various options to determine which one is right for you.

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