Do I Need Car Insurance Cover?

• Best Phone Car Charger To Buy Today

Understanding Auto Insurance-The Basics

Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. What is Auto Insurance in simple term?

In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

Auto Insurance provides coverage for:

• Property – Such as damage to or theft of your car.
• Liability – Your legal responsibility to others for bodily injury or property damage.
• Medical – The cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

Basic personal auto insurance is mandated by most U.S. states, and laws vary. Auto insurance coverages are priced individually (a la carte) to let you customize coverage amounts to suit your exact needs and budget.

Policies are generally issued for six-month or one-year timeframes and are renewable. The insurance company sends a notice when it’s time to renew the policy and pay your premium.

Who is covered by my Auto Insurance – and under what circumstances?

Your auto policy will cover you and other family members on your policy, whether driving your car or someone else’s car (with their permission).

It also provides coverage if someone who is not on your policy is driving your car with your consent.

Your personal auto policy only covers personal driving, whether you’re commuting to work, running errands or taking a trip.

It will not provide coverage if you use your car for commercial purposes. For instance, if you deliver pizzas.

Personal auto insurance will also not provide coverage if you use your car to provide transportation to others through a ride-sharing service such as Uber or Lyft.

Some auto insurers, however, are now offering supplemental insurance products (at additional cost) that extend coverage for vehicle owners providing ride-sharing services.

Is Auto Insurance coverage mandatory? What is Auto Insurance?

Auto insurance requirements vary from state to state, Country to Country. If you’re financing a car, your lender may also have its own requirements.

Nearly every state requires car owners to carry:

• Bodily Injury Liability: Which covers costs associated with injuries or death that you or another driver causes while driving your car.
• Property Damage Liability: Which reimburses others for damage that you or another driver operating your car causes to another vehicle or other property, such as a fence, building or utility pole.

In addition, many states require that you carry:

a). Medical Payments or Personal Injury Protection (PIP), which provides reimbursement for medical expenses for injuries to you or your passengers. It will also cover lost wages and other related expenses.

b). Uninsured Motorist Coverage reimburses you when an accident is caused by a driver who does not have auto insurance. Or in the case of a hit-and-run.

You can also purchase under insured motorist coverage. Which will cover costs when another driver lacks adequate coverage to pay the costs of a serious accident.

Uninsured motorist coverage helps you pay for damages caused by a driver who doesn’t have car insurance.

If you’re hurt or your car is damaged in a crash caused by such a driver, this coverage will help pay for costs, up to the limits in your policy. In that situation, the other driver would be considered underinsured.

Even if PIP and uninsured motorist coverage are optional in your state, consider adding them to your policy for greater financial protection.

What other types of Auto Insurance coverage are typical?

Six common car insurance coverage options are:

• Auto liability coverage,
• Uninsured and underinsured motorist coverage,
• Comprehensive coverage,
• Collision coverage,
• Medical payments coverage and
• Personal injury protection.

Depending on where you live, some of these coverages are mandatory and some are optional.

Understanding what’s required in your state and what each helps cover can help you choose the right coverage for your situation.

While most basic, legally mandated auto insurance covers the damage your car causes. It does not cover damage to your own car. To cover your own car, you should consider these optional coverages:

Related Post: How To Get The Best Car Insurance For You

• Uninsured And Underinsured Motorist Coverage: If you’re hit by a driver who doesn’t have insurance, uninsured motorist coverage may help pay for your medical bills. Or, in some states, repairs to your vehicle.

  If you’re hit by an underinsured driver, that means they have car insurance but their liability limits aren’t enough to cover your resulting medical bills.

  That’s where underinsured motorist coverage may help. Uninsured and underinsured motorist coverage is required in some states and optional in other states.

• Collision: Reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object—e.g., a tree or guardrail—when you’re at fault. While collision coverage will not reimburse you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car.
• Comprehensive: Provides coverage against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, hail, falling rocks or trees and other hazards—even getting hit by an asteroid!

Related Post: How To Save Money On Car Expenses

• Glass Coverage: Provides coverage from windshield damage, which is common. Some auto policies include no-deductible glass coverage. Which also includes side windows, rear windows and glass sunroofs. Or you can buy supplemental glass coverage.
• Personal Injury Protection: Personal injury protection, or PIP, is only available in some states. Like medical payments coverage, PIP may help pay for your medical expenses after an accident. In addition, PIP may also help cover other expenses incurred because of your injuries — for example, child care expenses or lost income.

  Personal injury protection is required in some states and optional in other states where it’s available.

• Medical Payments Coverage: If you, your passengers or family members who are driving the insured vehicle are injured in an accident. Medical payments coverage may help pay for costs associated with the injuries. Covered costs may include hospital visits, surgery, X-rays and more.

  Medical payments coverage is required in some states and optional in others.

What is Auto Insurance Costs

There are two primary costs associated with purchasing car insurance:

• Premiums and
• Deductibles.

Auto insurance premiums vary depending on:

• Age,
• Gender,
• Years of driving experience,
• Accident and moving violation history, and
• Other factors.

Again, most states mandate a minimum amount of auto insurance. That minimum varies by state, but many people purchase additional insurance to protect themselves further.

Additionally, if you’re financing a car, the lender may stipulate that you carry certain types of car insurance.

Related Post: How To Save Money On Car Expenses

For instance, you may need gap insurance if you’re purchasing an expensive vehicle that will likely depreciate very quickly once you drive it off the lot.

Gap insurance can help to pay off the difference between the vehicle’s value and what you still owe on it if you’re involved in an accident.

A poor driving record or the desire for complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk. Which means increasing your deductible.

Your deductible is the amount you have to pay when filing a claim before the insurance company will pay out anything to you for damages.

So, for example, your policy may have a $700 or $1500 deductible. Agreeing to a higher deductible can result in a lower premium but you’d have to be reasonably sure you could cover the higher amount if you need to file a claim.

How Is Car Insurance Priced?

• Vehicle Details: Such as the make, model and year.
• Deductible Amount: Because a higher deductible can lower your rate.
• Driving Record: Because a clean claims history means you’re a safe driver.
• Driving Habits: Because the more you drive in a year, the higher your rate may be.
• Coverage History: To make sure you’ve had continuous auto insurance protection.
• Location: Since more populated areas can increase your risk of an accident, vandalism or theft.

How are Auto Insurance Premiums Calculated?

Insurance companies consider many factors when setting car insurance premiums.

Every insurer’s goal is to balance the amount it charges you with how likely you are to require an insurance payout.

For example, a 16-year-old boy in a brand-new sports car will pay much higher insurance premiums than a 40-year-old woman in a station wagon.

This is because the boy is more likely to be in an accident, and his car will be more expensive to repair if he gets in one.

Every insurer has its own secret, regularly updated formula it uses in order to calculate your premium.

Here are some details your insurer may consider when setting your premium.

The Difference Between a Quote and a Premium

When you receive an insurance quote from an insurance company, that’s an estimate of how much the company will charge you for insurance.

In order to balance precision with simplicity, insurance companies don’t gather as much information when creating an insurance quote as they do when writing an actual policy.

For example, when getting a quote you might simply be asked if you have excellent, OK or poor credit.

Once you’ve actually signed up for insurance, your insurer might calculate your credit-based insurance (CBI) score while determining your premium. Your rate could be better or worse than what was specified for your quote.

When Do Automobile Insurance Premiums Increase?

Car insurance is generally sold in either six- or 12-month terms. However long your term is, your insurance costs will stay the same for that term unless you make a change to your policy, such as if you buy a new car or move to a new house.

Once your term is up, your insurance provider will reassess how much your premium should be. If you were involved in an accident or were caught speeding, your rates might increase; alternatively, if you took a safe driving course, your rate might go down.

Insurers are also constantly adjusting their models for how much to charge for insurance, so it’s possible your rate will fluctuate without any changes in your driving status at all.

How Does a Auto Insurance Deductible Work?

What is Gap Insurance and do I need it?

Collision and Comprehensive Insurance only cover the market value of your car. Not what you paid for it – and new cars depreciate quickly.

If your car is totaled or stolen, there may be a “gap” between what you owe on the vehicle and your insurance coverage.

To cover this, you may want to look into purchasing gap insurance to pay the difference. Note that for leased vehicles, gap coverage is usually rolled into your lease payments.

How Does Auto Insurance Work?

In exchange for paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

Policies are priced individually to let you customize coverage amounts to suit your exact needs and budget.

Policy terms are usually six- or 12-month timeframes and are renewable. An insurer will notify a customer when it’s time to renew the policy and pay another premium.

Regardless of whether they mandate having a minimum amount of auto insurance. Nearly every state requires car owners to carry bodily injury liability. Which covers costs associated with injuries or death that you or another driver causes while driving your car.

They may also require property damage liability, which reimburses others for damage that you or another driver operating your car causes to another vehicle or other property.

Key Takeaways

Looking for the best Car Insurance Cover? Do you want the Cheap Auto Insurance? Learn More Here