What is auto insurance:
Basic personal auto insurance is mandatory in most states and gives you some financial protection in the event of an accident. But is that enough? What are the options? Find out how auto insurance works and what types of coverage are available.
Understanding Auto Insurance: The Basics
Auto insurance is a contract between you and an insurance company that protects you from financial loss in the event of an accident or theft. In exchange for paying a premium, the insurance company agrees to pay your losses as stated in your policy.
Auto insurance provides coverage for:
The property, such as damage to or theft of your vehicle
Liability – Your legal liability to others for bodily injury or property damage
Medical – The cost of injury treatment, rehabilitation, and sometimes lost wages and funeral expenses.
Basic personal auto insurance is required in most states in the US, and laws vary. Auto insurance coverages are individually priced (on request) to allow you to tailor coverage amounts to exactly meet your needs and budget.
Policies are generally issued for a period of six months or a year and are renewable. The insurance company sends a notification when it is time to renew your policy and pay your premium.
Who does my auto insurance cover and under what conditions?
Your auto policy will cover you and other family members on your policy, whether you are driving your car or someone else’s car (with your permission). Your policy also provides coverage if someone who is not on your policy drives your car with your consent.
Your personal auto policy only covers personal driving, whether you’re commuting, running errands, or traveling. It will not provide coverage if you use your car for business purposes, for example serving pizza.
Personal car insurance will also not provide coverage if you use your car to provide transportation for others through a ride-sharing service like Uber or Lyft. However, some auto insurance companies now offer add-on insurance products (at an additional cost) to extend coverage to vehicle owners offering carpool services.
Is auto insurance coverage mandatory?
Auto insurance requirements vary from state to state. If you are financing a car, the lender may also have their own requirements. Almost all states require car owners to carry:
Bodily Injury Liability – Covers costs associated with injury or death caused by you or another driver while driving your vehicle.
Property Damage Liability – indemnifying others for damage caused by you or another driver driving your car to another vehicle or other property, such as a fence, building, or utility pole.
Additionally, many countries require you to carry:
Medical Payments or Personal Injury Protection (PIP), which provides compensation for medical expenses for injuries to you or your passengers. It would also cover lost wages and other related expenses.
Uninsured Motorist Coverage compensates you when the cause of an accident is an uninsured motorist, or if you crash in shock and run away. You can also buy under Insured Driver Coverage, which will cover costs when another driver lacks adequate coverage to pay for a critical accident.
Even if uninsured motorist and PIP coverage is optional in your state, consider adding it to your policy for added financial protection.
What are the other types of typical car insurance coverage?
While the statutory mandatory basic car insurance covers damage to your vehicle, it does not cover damage to your vehicle. To cover your own car, you should consider these optional covers:
Collision compensates you for damages to your vehicle that occur as a result of a collision with another vehicle or other object, for example a tree or a railing, when you are at fault. While a collision coverage will not compensate you for any mechanical failure or normal wear and tear on your vehicle, it will cover damage caused by potholes or the rolling of your car.
Provides comprehensive coverage against theft and damage from non-collision accidents such as fire, flood, vandalism, hail, fallen rocks or trees, and other hazards, including exposure to asteroids!
The glass cover provides coverage against windshield damage, which is common. Some auto policies include non-deductible glass coverage, which also includes side windows, rear windows, and sunroofs. Or you can buy an additional glass cover.
Auto insurance is a policy that vehicle owners purchase to reduce the costs associated with a car accident. Instead of paying for car accidents out of pocket, people pay annual premiums to the car insurance company; The company then pays all or most of the costs associated with a car accident or other damage to the vehicle.
Understanding auto insurance
Auto insurance premiums vary based on age, gender, years of driving experience, history of accidents and moving violations, and other factors. While not all states require auto insurance, most require minimal auto insurance. This minimum varies by state, but many people purchase additional insurance to further protect themselves. Also, if you are financing a car, the lender may require you to have certain types of car insurance.
A poor driving record or a desire for full coverage will result in higher premiums. However, you can lower your premiums if you agree to take more risks, which means a higher deductible.
How does car insurance work?
In exchange for paying a premium, the insurance company agrees to pay your losses as stated in your policy. Coverages include:
Property: damage or steal your vehicle
Liability: the legal liability of others for bodily injury or property damage.
Medical – Injury treatment costs, rehabilitation, and sometimes lost wages and funeral expenses
Policies are individually priced to allow you to tailor the coverage amounts to exactly suit your needs and budget. The terms of the policy are usually within six or 12 months and are renewable. The insurance company will notify the client when it is time to renew the policy and pay another premium.
Regardless of whether they require minimum auto insurance, almost all states require car owners to assume bodily injury liability, which covers costs associated with injuries or death caused by you or another driver while driving your vehicle. It may also require property damage liability, which compensates others for damage caused by you or any other driver driving your vehicle to another vehicle or property.
Several countries go further and require car owners to pay Medical Protection or Personal Injury Protection (PIP) payments that reimburse medical expenses for injuries suffered by you or your passengers. It would also cover lost wages and other related expenses.
Uninsured motorist coverage compensates you in the event of an accident caused by a driver who does not have auto insurance.
Who does auto insurance coverage protect?
The auto insurance policy will cover you and other family members on the policy, whether you are driving your car or someone else’s car (with your permission). Your policy also provides coverage for a person who is not listed on your policy and who drives your car with your consent.
Personal car insurance covers personal driving only. It will not provide coverage if you use your vehicle for business purposes, such as making deliveries. It also won’t provide coverage if you use your car to work on ride-sharing services like Uber or Lyft. Some auto insurance companies now offer add-on insurance products (at an additional cost) that extend coverage to vehicle owners who offer ride-sharing services.