Drivers have many decisions to make when shopping for a car. What models should you test-drive? What features work best for your family? What price range can you afford?

In addition to car-related issues, you must determine the right auto insurance to purchase to keep you and your family safe from catastrophic financial loss. The law mandates certain types of insurance, while others may be required by lenders or offered as options by your insurance company.

With so many details to understand, making intelligent decisions about insurance can seem challenging. The general purpose of insurance is to provide funds to fulfill any financial responsibilities you might incur following an accident for damages you caused while driving.

Brushing up on your insurance knowledge will not only make you a smart consumer but also ensure that you comply with the law. To help, the team at North End Mazda of Lunenburg, Massachusetts, serving Lowell, Worcester, and Nashua, New Hampshire, has put together this guide to describe the different types of car insurance.

Liability Insurance

Mazda Tree by Michael Coghlan is licensed with CC BY-SA 2.0Liability insurance is the most critical insurance type for protecting against financial losses from accidents. Most states, including Massachusetts (though not New Hampshire), require drivers to carry two types of liability insurance that'll pay damages for injuries from an auto accident where you're at fault.

The first is bodily injury, which pays for injury and pain and suffering claims arising from injuries to other drivers and passengers involved in the accident. The insurance payout can fund an attorney if you need one to represent you. Bodily injury insurance does not cover injuries to yourself.

The second type is property damage, which covers repairs to vehicles, structures, or other types of property damaged in an accident for which you are liable. As with bodily injury, property damage liability insurance does not cover damages to your car.

States that require liability insurance will mandate certain minimum levels of coverage. The minimums in Massachusetts are $20,000 for injuries to one person and $40,000 for injuries to multiple people in the same accident. Minimum property damage coverage is $5,000 for a single accident.

Some financial planners and insurers suggest purchasing more than the minimum liability coverage for added protection against large settlements or verdicts, which have become common.

Personal Injury Protection

Massachusetts law also requires drivers to carry personal injury protection (PIP)coverage on their policies to drive their cars legally in the state. PIP covers the costs of medical care, lost wages, and other damages you, your passengers, or pedestrians sustain in the event of a car accident. According to the Massachusetts Division of Insurance Consumer Service Unit, the maximum amount of PIP coverage is set at $8,000.

Uninsured Motorist Coverage

We'd like to believe that everyone does the right thing and buys the proper amount of insurance. Sadly, that's not always the case. For this reason, Massachusetts also mandates bodily injury caused by uninsured auto coverage. This type of insurance covers you, anyone you let drive your car, household members, and passengers in cases involving an uninsured motorist or a hit-and-run driver. According to the Division of Insurance Consumer Service Unit, drivers must carry at least $20,000 per person and $40,000 for all people injured in an uninsured auto accident.

Collision Insurance and Comprehensive Insurance

In addition to mandatory coverage, drivers may sometimes require what's known as "discretionary" coverage, the most common types of which are collision insurance and comprehensive insurance. You may have to purchase these under the terms of auto loans. Here's what you need to know about each:

• Collision coverage provides protection for any damages to your car from striking another vehicle or other stationary object, such as a tree
• Comprehensive coverage protects against non-collision-related damages to your car from things such as bad weather, vandalism, fire, or theft.

Collision and comprehensive cover are typically subject to a deductible, meaning you pay the first part of the costs out of your own pocket. Higher deductibles usually result in lower premiums, and the opposite is also true: lower deductibles require higher premiums.

Talk to your insurance agent about the coverage that makes sense for you and how much protection you might need. Often, people invest in greater amounts of insurance to hedge against major catastrophic events, such as tornadoes and hurricanes.

Other Types of Car Insurance

In your search for insurance, you may hear about other types of voluntary coverage. Here are some of the options available:

• Rental replacement insurance: An accident could leave you without a car for an extended period. Rental insurance provides a small fee, typically around $25 or $35 a day, towards the rental of a replacement vehicle.
• Towing and labor coverage: Very serious accidents may require you to have your car towed. Towing and labor insurance will reimburse you for those expenses up to a certain level.
• Gap insurance: If your vehicle is totaled, you may find yourself upside down in your loan, where you owe more than the car is worth. In some instances, gap insurance will help you pay off your car loan following an accident to allow you to start fresh.

Do Your Homework on Auto Insurance

A vehicle is one of the most significant investments you will make, so it makes sense to purchase insurance to avoid a total loss in the event of an accident. Most states require some form of auto insurance to drive a car, and often, those requirements are based on the minimum necessary amount of coverage.

Consider purchasing more than the minimum to gain additional peace of mind. Insurance agents can help you understand the various factors involved in selecting the proper amount of insurance. Shop around to find the best deal.

The sales team at North End Mazda is ready to work with you to find a vehicle you'll be proud to drive. We're a full-service Mazda dealer serving northern Massachusetts and southern New Hampshire residents. In addition to new and certified used Mazdas, we maintain a wide selection of used autos from other makers and offer financing support and auto service. Call us or contact us online to let us know how we can help.