Most car owners may claim that they already know what car insurance is, but the sad truth is that many people don’t understand every aspect of car insurance. With common phrases such as “premiums and “deductibles being used as well as a variety of coverage options, insurance can become tricky.
Insurance is required to have a car. It protects yourself and others in the event of an accident and provides other benefits as well. In this article, we’ll go over the basics of how car insurance works so you can be ready to utilize your coverage when needed.
What to Consider When Buying an Auto Insurance Policy?
It is important to consider some factors before purchasing a car insurance policy. These factors include the kind of car that you are driving, the amount you are willing to pay, and your driving record. For example, if you have a new or expensive car, the cost of insurance will likely rise. Or, if you’ve been in an accident, you may have to pay more as well. You should understand the basics of auto insurance to ensure that you choose a coverage that fully protects you in case of an accident.
How Does Car Insurance Work?
Once you purchase an insurance policy, the agent or insurer will ask you some basic questions about your vehicle as well as take you through various options to enable you to choose the best. Choosing a policy with a wider coverage means that you will have to pay more than when you pick one with coverage on just what the state laws require.
When something happens, or your car is damaged, you will be required to file a “claim” with the agency or insurer in order to be compensated. However, it is important to note that the insurer will only pay for losses or damages that fall under the coverages that you choose, but up to a given limit.
Type of Auto Coverage
When you purchase auto insurance, you are purchasing a policy that is usually based on a variety of factors. Some of the factors include the type of insurance coverage that you want and the kind of vehicle that you drive. Car insurance policies are designed as a set of various types of coverage. Therefore, the most important thing to do when you want to learn how they work is understanding the different types of coverage offered by various companies.
Some of the kinds of coverage may be required by the law, while others may be optional. This all depends on the price you’re able to pay for a policy and your own driving habits. For example, a full coverage insurance plan includes collision, comprehensive, and liability coverage while other plans may not have as much.
- Collision Coverage
This type of insurance policy covers damages to your car in case of a collision with an object or another vehicle.
- Liability Coverage
Liability coverage compensates others for property damage or bodily injury. Property damages include damaged automobiles and property, while injury damages include pain and suffering, lost wages, and medical expenses. It also caters to court and defense costs. Usually, the amount of liability coverage that purchase is determined by the state laws, but it is possible to acquire more coverage than what your state dictates.
- Comprehensive Coverage
As the name suggests, comprehensive coverage pays for damage or loss to the insured car that does not occur in a car accident. Some of the types of damages covered by comprehensive insurance include loss or damages that result from flood, wind, fire, theft, and vandalism.
- Uninsured Motorist Coverage
The coverage pays for damages to the insured car that is caused by an individual with insufficient liability insurance.
- Medical Coverage
This policy coverage pays for the medical expenses that result from an auto accident regardless of fault.
- Personal Injury Protection (PIP)
PIP is one of the insurance coverage that is required in some states. It pays for medical expenses for the treatment of the insured driver regardless of fault.
Another benefit of car insurance comes into play when renting a car. Rental reimbursement pays for a rental car in case your personal vehicle is damaged due to a car accident. This coverage usually comes with a daily allowance for rental.
Most insurance policies combine various types of coverage that may include either of the coverages discussed above. However, the first step to understanding the right insurance policy to opt for is considering state laws in your place. State laws will guide you in knowing the minimum insurance that you need for your vehicle.
As mentioned above, what the state laws require you to have for your vehicle can give you a minimum amount of insurance coverage that you need. However, it is up to you to decide what you should exactly purchase. You also need to understand how car insurance works to know the best insurance coverage to choose from. Buying more coverage than you need ensures that you are covered for a number of problems.