If you buy a car, you probably know that you need auto insurance. But do you know what type of policy to purchase? You can choose from many options, but the main decision is to buy liability only or full coverage. Which is the better choice for you? If you are unsure about this, here are some factors to consider as you decide what type of plan to purchase.
Loan vs. No Loan
The first thing to look at is how you purchased the car. Did you pay cash for it? If so, you do not have a loan on the car, which means you do not have a lender dictating the auto insurance coverage you need. If you purchased the car with a loan, you have a lender that might tell you what types of coverage you need. The main thing to know is that you cannot buy a liability-only policy if you have a lender for the car. The lender will require full-coverage insurance, while you can purchase a liability-only policy if you do not have a lender. After considering this factor, you will know if you need full coverage or not. If you do not, you can consider a few other things.
The Car's Value
The other main thing to consider in this decision is the car's value. How much is your car worth? If it is not worth a lot of money, you might not need full-coverage insurance. If your car is worth a lot, getting a full-coverage policy is usually the better choice.
With full-coverage insurance, you have protection against losses to your car, even if you cause the losses. For example, if you cause an accident, your car might have some damage. If you only have liability coverage, you will have to pay for the repairs. With full-coverage insurance, you can file a claim against your policy. If the insurance company approves the claim, they will compensate you for the damages.
Your Financial Situation
You can also consider your financial situation when deciding. If you have very little income right now, you might want the cheapest coverage possible. In this case, you would save money by purchasing liability coverage alone. If you have enough income to pay for full coverage, it might be worthwhile to choose this option.
You can discuss your options and situation with an auto insurance agent to make the best decision about your policy.