A Beginner’s Guide To Understanding Car Insurance

Thinking of buying vehicle insurance but don’t know where to start? Scared of having your old car conk out on you at the most opportune time and not being able to access much-needed help? 

Car insurance is essential. There’s no debate about that. Without it, you’re left to pay for hefty out-of-pocket costs for repair, medical fees, and other expenses related to car collision damages. Some vehicle insurance companies even offer additional perks that include linking you to the nearest auto repair shop and getting you a rental car while your car is in the shop.      

You probably need to know more about how car insurance works and its different forms, being that there are various insurance types based on you and your family’s needs. If you’re not keen on spending too much on your vehicle insurance, you can choose from insurance that covers personal injury, damage, collision, and other related problems. However, also check your state requirements, as car insurance requirements are different from state to state. 

Car crash dangerous accident on the road. SUV car crashing beside another one on the road.

Read on through the basics of car insurance. 

How Does a Car Insurance Work?

A car insurance policy works by reducing the costs and one-time costs associated with the damages incurred in a vehicle collision, whether hospitalization and injury costs, repair costs for you or the other car involved, as well as property damages caused by the impact.   

When you purchase car insurance, you’ll be asked to pay monthly, quarterly, or yearly insurance premiums that form part of the whole amount of your total car insurance package. 

Your insurance also comes with a deductible, which can range anywhere from USD$250 to USD$1,000, even higher. This represents the amount you, as an insurance owner, have to shell out before the insurance pays the rest of the payable amount.  

If you opt for car insurance with a high deductible, your insurance rate will reduce, but this means you’ll have to pay more out-of-pocket costs. Inversely, a low deductible means the highest rates but lower upfront costs in the event of a vehicle collision.  

The Insurance Information Institute places an average vehicle insurance cost of USD$866.31 for every American car owner.    

Car (automobile) insurance and collision damage waiver concepts. Businessman with protective gesture and icon of car.

Different Types of Car Insurance

After paying for your insurance premium or waiting for a certain period, you’ll be entitled to the following coverages, depending on the types of insurance purchased:  

1. Liability Coverage
Liability insurance can protect you if you figured in an accident where authorities have found to be your fault. It can be both of the following:   

  • Bodily injury liability will cover the costs related to another person’s injuries
  • Property damage liability helps pay for damages to another person’s physical asset.

This type of insurance is mandatory in most states. 

2. Uninsured and Underinsured Motorist Coverage
This form of auto insurance is not mandatory in most states, although for your own sake, it’s better to include this in your package. How so? In cases where you’re bumped by a driver who doesn’t have insurance or a motorist who has restrictive insurance coverage, your uninsured and underinsured coverage will save the day by filling in the costs. This motorist coverage helps cover our medical bills and, in some cases, car repair costs. 

3. Medical Payments Coverage 

This medical insurance applies to everyone inside, and in some cases, immediately outside the car at the time of the accident. This means that your rehabilitation, dental care, and funeral costs will be covered whether you are injured as a passenger, a driver, or even when you’re a pedestrian who’s hit by a vehicle while walking on the street. Some states require this type of car insurance, while some don’t.       

4. Personal Injury Protection (PIP)

PIP insurance is also known as no-fault insurance because, unlike liability insurance, it applies whether you or the other driver caused the accident. PIP covers everyone inside your vehicle, covering medical and non-medical costs, like lost income and child-care expenses for the insurance holder.  

5. Collision Coverage 

This insurance coverage is typically required by your lender if you’re financing your vehicle. Newer auto models are also protected from more comprehensive coverage against collisions involving your car and another car, or only your automobile, such as when it accidentally rolls over. Collision coverage also pays for incidents where another car crashes your parked car or an accident involving your rented car.       

In these collisions, the insurance company will cover the repair bills up to our vehicle’s market value less your deductible cost. Consider this if you’re buying an expensive car because if your car is totaled, this insurance can help you with a replacement.    

6. Comprehensive Coverage
Don’t be misled by the name, as this comprehensive insurance does not mean you’re getting all the types of coverage discussed earlier. Instead, this type of insurance aptly called the “other than collision” coverage protects the owner from non-driving-related accidents.  

If your vehicle is damaged by natural occurrences such as hailstorm, flooding, a fallen tree, or theft, comprehensive insurance may help repair or even replace your vehicle. This is another optional coverage, one you might want to consider depending on your car’s cost and condition.  

Things to Consider Before Buying Car Insurance 

To avoid paying too much, look for Florida cheapest car insurance companies and consider the following factors to ensure your insurance package hits all the right spots.      

  • Model and car type
  • Vehicle mileage and use
  • Location 
  • Driving experience and history
  • Who else will drive or use your vehicle?
  • Vulnerability to the types of accidents
  • You and your family’s safety 
  • Affordability of deductibles and premiums  

 The Bottom Line 

Choosing the most appropriate and reliable vehicle insurance is critical in owning a car. Before buying the right coverage, study the package inclusions and determine the level of protection you need. As a rule of thumb, go for complete protection, something that’ll give you peace of mind, whether you’re on or off the road.

Author: Brandon Park