Introduction to Car Insurance
Auto insurance is a policy purchased by car owners to reduce the costs associated with having a car accident. Instead of paying out-of-pocket for car accidents, people pay an annual premium to a car insurance company; the company then pays all or most of the costs associated with car accidents or other vehicle damage.
Learn about car insurance
Auto insurance premiums vary by age, gender, years of driving experience, accident and mobility violation records, and other factors. While not all states require auto insurance, most states require a minimum amount of auto insurance. This minimum varies by state, but many people purchase additional insurance to further protect themselves. Also, if you’re financing your car, your lender may require you to purchase certain types of auto insurance.
A poor driving record or a desire for comprehensive coverage will lead to higher premiums. However, you can lower your premiums by agreeing to take more risk, which means increasing your premium deductible.
How does car insurance work?
In exchange for paying the premium, the insurance company agrees to pay your loss as stated in your policy. Insurance coverage includes:
- property; – damaged or stolen car
- Liability; – legal liability for bodily injury or property damage to others
- Medical; – costs for treatment of injuries, rehabilitation, and sometimes lost wages and funeral expenses
Insurance policies are individually priced, allowing you to customize the amount of coverage to meet your exact needs and budget. The policy term is usually 6 months or 12 months, renewable. The insurance company will notify the customer when it needs to renew and pay another premium.
Whether or not they mandate a minimum amount of auto insurance, nearly every state requires car owners to be liable for personal injury, which includes costs related to injury or death caused by you or other drivers while driving your car. They may also seek property damage liability for damage to other vehicles or other property caused by you or other drivers of your vehicle.
Some states go a step further and require car owners to pay medical bills or Personal Injury Protection Payments (PIP) to reimburse you or your passengers for medical expenses for sustained injuries. It will also pay for lost wages and other related expenses.
Uninsured driver insurance; reimburses you if the accident was caused by a driver without auto insurance.
Who does car insurance cover protect?
A car insurance policy will cover you and other family members on the policy, whether driving your car or someone else’s car (with their permission). Your policy also provides coverage for someone who is not on your policy and who drives your car with your consent.
Personal auto insurance is for personal driving only. If you use your car for commercial purposes (such as delivery), it will not provide insurance. It also doesn’t offer insurance if you use your car to work for a ride-sharing service like Uber or Lyft. Some auto insurers now offer supplemental insurance products (for an additional fee) to expand coverage for car owners who offer shared services;
Bottom line
While other types of insurance such as health and homeowner’s may seem more important, if you own a car, whether or not your state requires auto insurance, having an insurance policy can save you a lot of money and deterioration in the long term.
