Basics of Auto Insurance


What is car insurance?

Insurance is an written agreement between insurance company and individual driver to protect against financial loss associated with an accident. It helps to protect the losses you might incur while driving on a road. It can come to the rescue if your car is vandalized, damaged by fire or stolen. The extent of that coverage however depends on each individual policy. It is mandatory in most states.

Who needs car insurance?

If you drive a vehicle you need a car insurance. Every state requires that you carry some form of liability car insurance. Liability insurance is the most basic and cheapest car insurance which covers damage to another person or car if you are at a fault in accident.

Even if you have a vehicle that you do not drive, it is still wise to get cheap car insurance. For one, it will cover unforeseen damages like a tree falling on the car, vandalism, or uncontrollable damage not associated with driving. Many states will penalize a vehicle owner for lapses in coverage. So, while you may not be driving a vehicle due to a revoked license, temporary handicap or other reason, you should still carry car insurance so you are not penalized for a lapse in coverage.

What if you don’t have car insurance:

First of all it is illegal to drive cars without insurance. If you are caught without license you may face charges . Damage to your car as well as medical expenses can cause you thousands of dollars. Many people find it very difficult to pay these damages out of pocket and therefore insurance is necessary.

Components of car insurance:

Normally car insurance companies offer six types of coverage

  • Medical payments or Personal Injury Protection (PIP)
  • Property damage liability
  • Bodily injury liability
  • Collision
  • Uninsured/Underinsured motorists coverage (UM/UIM)
  • Comprehensive

Liability Insurance:

This insurance policy covers the damages done to the victims of a car accident when you are at fault. It covers whole range of medical or property costs for other party.

Uninsured (UM/UIM) insurance:

This insurance policy will cover you against a driver who has no liability or any other kind of car insurance to his name. This insurance is very fruitful as your insurance fate doesn’t depend on others insurance policies.

Collision Coverage:

This coverage policy will cover all costs in a collision whether or not you were at fault. It will cover all the medical and property costs for you.

Comprehensive Coverage:

This insurance policy covers all the damages to your car and is known as “full coverage”. Any damage to your car that is not associated with a collision such as damage done by a natural disaster will be covered by this insurance. This is not a cheap but a full proof coverage.

How to choose a car insurance company

Choosing the best auto insurance company can be stressful. Not all insurance companies are the same. Over time, this can lead to significant differences in the premium rates offered to different groups of drivers. The only way you find out about this is by shopping around. One of the best ways to find car insurance companies is to compare car insurance quotes online.

What coverage level do you need?

Liability auto insurance coverage is required in almost all states, each with its own minimum requirements. Regardless of your state’s minimum, experts recommend that all drivers have liability coverage that is no less than $100,000/$300,000/$50,000 (bodily injury per person/bodily injury per accident/property damage). Some states also require PIP and/or Uninsured motorist coverage. For complete state liability limits and a list of states that require non-liability coverage such as PIP.

What info will insurance companies need from me?

Insurance companies need very basic information like address, vehicle details and your driving history. Some companies might run a credit report on you

Benefits of car insurance:

Car insurance offers multiple benefits:

  • Coverage against loss of or damage to the vehicle insured
  • Coverage against loss or damage to your vehicle caused by
  •  
    Accident
    Theft
    Fire, Explosion, Self Ignition, Lightning
    Riots, Strikes or act of terrorism
    Any Natural Calamity
     

  • Liability To Third Parties, arising out of an Injury or Death of a third party and Property Damage
  • Personal Accident Cover For Driver