For anyone who drives a car, having car insurance is a must. Most states already require it by law. If you are buying car insurance for the first time, it’s a good idea to make sure you understand the basics of car insurance and what it does.
What Is Car Insurance?
In simple terms, car insurance is an agreement between you and your insurance company. You purchase a policy that covers your car in case it gets damaged in an accident. It also safeguards you from the financial burden of being liable for property damage or injuries sustained if you cause an accident. Depending on your requirements, you can buy a policy that provides you with financial assistance for various damages, including damages due to theft, vandalism, and bad weather.
How Does Car Insurance Work?
Car insurance follows the same pattern as other insurance products. You have to pay a monthly or annual premium for it. In return, you receive coverage for various sub-components including liability insurance, collision insurance, and personal injury protection.
When you buy an insurance policy, beyond the minimum coverage amount, you have the freedom to choose the amount of coverage you want in each sub-component. The insurer will ask you simple questions regarding your car, your characteristics, and your personal requirements, as all these factors impact the price of your policy.
Once you are insured, you can file a ‘claim’ in case an accident happens. The insurer will check if the damage is covered and then pay for losses either entirely or up to a certain limit (but that is after you have paid the deductible amount). Your insurer may either pay you directly or may make a payment to the other party.
Do You Need Car Insurance?
Car insurance is required in nearly all states with for a few exceptions such as New Hampshire. Even in places where car insurance is not mandatory, financial responsibility is still expected. So it is still highly recommended for you to be insured (unless you want to pay a hefty amount from your own pocket). If you drive without insurance where required and get pulled over or in an accident, you will need to pay a fine. In extreme cases, you may even have your license revoked or go to jail.
Types Of Car Insurance
With this coverage, you can pay for accidental bodily injury and property damages to others. The policy covers medical expenses, lost wages, property damages, and vehicle damages. The coverage also pays for defense and court costs.
In this policy, the insurer pays for damages to your car caused by a collision with another vehicle or object.
This policy covers for loss or damage caused to an insured vehicle due to factors other than auto accidents. This can include damage caused by fire, hail, flood, wind, theft, or vandalism.
The policy pays for your medical expenses in case of an accident, regardless of fault.
Personal Injury Protection
PIP policy is mandatory to have in some states. The policy covers medical expenses of the insured person in case of an auto accident, regardless of fault.
The uninsured policy pays for your car’s damage when an accident is caused by someone who does not have liability insurance. On the other hand, the underinsured policy covers the costs when the damage is caused by someone who does not have sufficient liability insurance.
As the name suggests, rental reimbursement policy pays for a rental car for you to use while your vehicle is being repaired after damages covered by your policy.
Aside from the fact that you may be legally required to carry an auto insurance policy, having car insurance is beneficial in many ways. It not only protects your financial well-being by mitigating the risks of paying a considerable amount, but also pays for your own car repairs and medical expenses after an accident.
This is just the tip of the iceberg! If you want to learn more about car insurance policies, visit our experts at Tammy Sower Insurance today!