Auto Insurance

Auto Insurance Overview

When you buy or rent a car, it is important to protect that investment. Obtaining auto insurance can give you peace of mind if you are involved in an accident or if a vehicle is stolen, robbed, or damaged by a natural disaster. Instead of paying for car accidents out of their own pocket, people pay annual premiums to an auto insurance company; The company then pays all or most of the costs associated with a car accident or other damage to the vehicle.

KEY TAKEAWAYS

Auto insurance is designed to protect you from financial loss if you are involved in an accident or if the vehicle is damaged in any way.

Most states require you to have minimum liability insurance coverage; Some also require you to have other types of coverage, such as uninsured motorist coverage.

Premium is what you pay monthly, semi-annually, or annually to maintain your auto insurance policy, while deductibles are the amount you pay at the time you file a claim.

It's important to shop around for the best auto insurance rates to find the right coverage for your vehicle at the right price.

What Is Car Insurance?

Auto insurance is effectively a contract between you and an insurance company in which you agree to pay premiums in exchange for protection against financial losses resulting from an accident or other damage to the vehicle. Auto insurance can provide coverage for the following:

• Damage to the vehicle, including your car or another driver's vehicle
• Property damage or bodily injury due to an accident
• Medical bills and/or funeral expenses related to injuries sustained in an accident

The exact details of what is covered depend on the minimum coverage requirements for your state and any additional coverage options you include. All states except New Hampshire require drivers to have a minimum amount of bodily injury liability coverage and property damage liability coverage.

Auto Insurance Cost

There are two main costs associated with buying auto insurance: premiums and deductibles.

Auto insurance premiums vary based on age, gender, years of driving experience, history of accidents and traffic violations, and other factors. Again, most states require a minimum amount of auto insurance. That minimum varies by state, but many people buy additional insurance to further protect themselves.

Also, if you are financing a car, the lender may stipulate that you have certain types of car insurance. For example, if you are buying an expensive vehicle, you may need gap insurance, which will depreciate very quickly after a lot of driving. Gap insurance can help pay the difference between the value of the vehicle and what you still owe if you are involved in an accident.

A poor driving record or a desire for full coverage will lead to higher premiums. However, you can lower your premium if you agree to take a higher risk, which means increasing the deductible amount.

Your deductible is the amount you must pay when you file a claim before the insurance company will pay you anything for the loss. So, for example, your policy may have a deductible of $ 500 or $ 1,000. Agreeing on a higher deductible can result in lower premiums, but you need to make sure you can cover the higher amount if you need to file a claim.

Tip: Ask your insurance company about ways you can lower your auto insurance rates, like getting a safe driving discount or taking a defensive driving course.

How does car insurance work?

In exchange for paying the premium, the insurance company agrees to pay your loss as stated in your policy. Policies are individually priced to allow you to customize coverage amounts to meet your exact needs and budget. The terms of the policy are usually six or 12 months long and are renewable. An insurer will notify the customer when it is time to renew the policy and pay other premiums.

Despite requiring a minimum amount of auto insurance, almost all states require car owners to have bodily injury liability, which covers costs associated with injury or death while driving their car. They may also require property damage liability, which reimburses others for damage that you or any other driver operating your car does to another vehicle or other property.

Many states go one step further, requiring car owners to make medical payments or Personal Injury Protection (PIP), which reimburses medical expenses for injuries caused to you or your passengers. It will also cover lost wages and other related expenses.

Uninsured motorist coverage reimburses you when an accident occurs due to an uninsured driver.

Underinsured motorist coverage is designed to protect you when you are involved in an accident with a driver who has some insurance but not enough to cover the full cost of the claim.

Note: Getting a car insurance policy above the minimum limits set by state law may increase the cost of coverage but it could benefit you later if you're involved in an accident.

Who is covered by auto insurance coverage?

A car insurance policy will cover you and other family members on the policy, whether you are driving your own car or someone else's car (with their permission). Your policy also covers anyone who is not on your policy and drives your car with your consent.

Personal car insurance covers personal driving only. If you use your car for business purposes, such as making deliveries, it will not provide coverage. It also won't provide coverage if you use your car to commute to ridesharing services like Uber or Lyft. Some auto insurers now offer add-on insurance products (at an additional cost) that expand coverage for vehicle owners who provide ride-sharing services.

Last Words

While other types of Insurance, like health and homeownership insurance, may seem more important, if you have a car, even if your state requires auto insurance, having an insurance policy can save you a lot of money and aggravation in the long run. . Remember to shop around for the best auto insurance rates that you can get the coverage you need with.