Understanding the basics of auto insurance
A contract for insurance on autos is that you sign with an insurance provider which safeguards you from losses in financial terms, in the event of an accident, or theft. In exchange for you paying a monthly premium, the insurance company agrees to cover your losses as stated in the policy.
Auto insurance provides coverage for:
Property like the loss or damage to your vehicle
Liability – Your legal liability to other people for bodily harm or property damage
Medical is the expense of treatment for injuries, rehabilitation, and, sometimes, lost wages as well as funeral costs
The basic personal auto insurance policy is required by the majority of U.S. states, and laws can differ. Insurance policies are priced separately (an at-a-carte) which allows you to adjust the amount of coverage to meet your specific needs and budget.
Policies are usually issued for one-year or six months intervals and can be renewed. The insurance company provides an announcement when it’s time to renew your policy and you have to pay your cost.
Who’s covered by my insurance policy for my car, and in what conditions?
Your auto policy covers the family members of yours and others who are covered by your policy, regardless of whether they are driving your vehicle or else’s (with their consent). The policy also covers anyone who isn’t in your insurance is driving your vehicle with your permission.
The policy you have on your vehicle only protects your vehicle regardless of whether you’re driving on your way to work, shopping, or going on a trip. It does not cover you when you drive to conduct business, like when you take pizza delivery.
Personal auto insurance may not cover for you if you utilize your vehicle to transport others via a ride-sharing company like Uber and Lyft. Certain auto insurance companies however are providing insurance options (at extra cost) that provide insurance coverage to car owners who provide ride-sharing services.
Does auto insurance coverage have to be mandatory?
Insurance requirements for autos differ between states. If you’re financing your car and your lender might have its own set of requirements. In nearly every state, motorists to carry:
Bodily liability for injuries is a type of insurance that covers costs incurred by accidents or deaths caused by you or another driver cause while driving your vehicle.
Liability for property damage reimburses other people for any damage you or a driver in your vehicle cause on another car or property, for example, the fence, building, and utility pole.
Additionally, several states require you to have:
Medical payments, also known as insurance for personal injuries (PIP), will reimburse medical expenses incurred in the event of injuries to passengers or you. Also, it covers the loss of wages as well as other costs.
The uninsured driver coverage covers you if an accident occurs due to the driver who doesn’t have insurance on their vehicle, or in the event of the case of a hit-and-run. It is also possible to purchase insurance for underinsured motorist coverage which covers the cost of an uninsured driver fails to have the coverage to cover the cost of an accident that is serious.
Even even if PIP or uninsured driver insurance are not required in your state, you should consider including them in your insurance to provide greater financial security.
What other kinds of coverage for auto insurance are the most common?
While the majority of basic, legally mandated auto insurance policies cover the damages that your car can cause but they will not cover the damage to your vehicle. For the protection of your vehicle take a look at the following optional coverages:
Collision covers the damage to your vehicle caused as a result of collisions with other vehicles or another object–e.g. trees or guardrail if you’re at fault. Although collision coverage won’t cover mechanical issues or normal wear and tear to your vehicle, it will pay for damage caused by potholes or the result of rolling your car.
Comprehensive gives protection against damage and theft caused by events that are not a collision like a flood, fire vandalism, hail, trees falling, or falling rocks, and many other dangers, including being struck by an Asteroid!
Glass coverage offers protection against damages to the windshield, which is the norm. Certain auto policies offer no-deductible glass protection, which also covers front and side glass windows, and glass sunroofs. Also, you can purchase additional glass protection.
How do I get gap insurance? Why should I get it?
Collision and comprehensive insurance will only cover the value of your vehicle but not the amount you paid for it. New vehicles appreciate quickly. If your vehicle is damaged or taken away, it could be there is a “gap” between what you have to pay for the car and the coverage you have with your insurance. To make up for this you might want to think about buying gap insurance to cover the gap. It is important to note that when you lease a car the gap coverage is typically included in your lease payment.