As the population increases, more cars are filling the highways. With so many vehicles on the road, chances of car crashes have significantly increased. Even if you think you are a good driver, car insurance is vital for every car owner. Car insurance is required by law in all states and protects you if an accident occurs. Without insurance, you risk having to pay enormous costs in the event of a car crash. Liability Insurance and Collision Insurance are two important types of car insurance that everyone should understand.

Liability Insurance

The laws in most states require a car owner have at least liability insurance on any vehicle they drive. Liability pays for damages resulting from an accident where you have been deemed responsible.

Liability insurance is divided into two categories:

• Bodily injury liability covers the policyholder or another covered policyholder if someone else is injured during a car accident. Bodily injury covers loss of wages, medical bills, rehabilitation expenses, pain and suffering, and other expenses associated with the accident.

• Property damage liability covers the policyholder or another covered policyholder if they damage someone's car or property during a car accident. If you crash into someone's property such as a house or fence, liability insurance will pay for repairs. State laws usually mandate minimum amounts, but higher amounts are recommended.

If you are in an accident where you are not necessarily at fault and the other driver does not have liability car insurance, you are protected by insurance known as uninsured motorist coverage.

It is suggested that you acquire at least $500,000 or $1,000,000 liability. You will rest easy knowing that you will be covered for all damages

Collision Insurance

Collision insurance is the insurance which pays for damages to your car if you are in an accident and you are deemed responsible. Your insurance policy will pay for costs up to the fair market value of your vehicle. You are covered in such instances as when your car hits another vehicle, when your car hits property such as a lamp post, and if your car hits a parked vehicle.

Advantages of having car insurance include:

• If you car is leased or financed, the lender may mandate that you have collision insurance
• If you have a new car, collision coverage will pay for any repairs or replacements you need

Collision coverage is optional and deductibles vary from $250, $500, and $1000. If you have an old car that is not in great shape, coverage will only pay for the cash value of the car. Collision coverage is not required by law. However, if you are involved in a collision, you will be responsible for fixing any damage or replacing your car.

The amount you pay for car insurance depends on the make and model of your car, your driving record, your age, gender, marital status, and where you reside. When you decide to purchase car insurance make sure you compare quotes from at least three insurance companies. Ask insurers how much liability and collision insurance needs to be purchased to meet your individual or business needs. Check the terms and conditions to make sure they meet state regulations.

When you drive a car, you are carrying a tremendous amount of responsibility. You never know when an accident may happen. You may think you are a great driver, but that does not mean that all of the others on the road are great drivers. It is important to protect yourself in case of an accident. Without car insurance, you may end up in a financially devastating situation that will stay with you for many years.