How Does Car Insurance Work?

Car accidents can be expensive, especially if your car is badly damaged or someone is injured. The role of auto insurance is to help cover your bills and protect you from financial obligations that could be damaging. This is how auto insurance works.

KEY TAKEAWAYS

    • Auto insurance policies cover several types of coverage, some of which are mandatory or optional, depending on where you live.
    • Nearly all states require motorists to have some form of auto insurance and also set a minimum amount.
    • They differ depending on the type and size of insurance coverage, deductibles you choose, and other factors.

 

What Does Car Insurance Cover?

An auto insurance policy covers several types of coverage, some of which are required in most states and others are optional. The most common mean values ​​are:

    • Personal Injury Liability Insurance If you are involved in an accident that injures another driver or their passenger and you are at fault, this coverage will help pay for the costs of your policy restrictions. in 49 states and the District of Columbia.1 (An exception is New Hampshire, which allows motorists to opt out of insurance but “recommends” them to purchase it.)2
    • Property damage liability insurance. This includes any damage you cause to another driver’s vehicle or other property, such as a neighbor’s fence. This is also required in almost every state.
    • Collision protection. Liability insurance can cover damage to your vehicle in the event of an accident. It is optional in all states.
    • Comprehensive coverage. conjointly referred to as “other than collision,” comprehensive covers harm to your vehicle from causes comparable to flooding, a fallen tree, or a fire. It also covers you if your automobile is stolen. Like collision coverage, it’s optional.
    • Medical Payments (MedPay) / Personal Injury Protection (PIP). Some states require MedPay or PIP to cover medical bills and related costs if you or someone else in your car is injured in an accident.
    • Uninsured or Uninsured Motorist Protection – If you’ve ever had an accident with someone who doesn’t have auto insurance or their insurance is insufficient to cover the damage you caused, this insurance can cover that deficiency. State.

 

If you rent a car or have an outstanding car loan, you may also want to consider a separate type of policy called gap insurance. In the event that your car is declared completely lost after an accident, difference insurance will cover any difference between what the auto insurance company pays you and the amount you still owe on the lease or loan.

In addition to the types of insurance mentioned above, many insurance companies also offer more specialized types of policies such as vintage or vintage car insurance and car sharing insurance for people who drive for companies like Uber or Lyft.

Keep in mind that if you are using your vehicle for business purposes, you may need a commercial auto insurance policy, not a personal policy.

Whose Does Car Insurance Cover?

Typically, separate auto insurance policies cover the policyholder and their family members listed as the driver on the policy. Policies also generally apply to anyone who is not covered by your policy but who drives your vehicle with your consent.

How Much Car Insurance Cost?

According to AAA, the annual premium for full insurance (liability plus collision and full insurance) in 2020 averages $ 12024. However, your costs can be much higher or lower.

The cost of car insurance depends on many factors, including the buyer’s driving experience, place of residence and the cost of the car. Prices can also vary between companies with the same coverage.

An important variable is the coverage of the policy. Countries that require certain types of insurance also stipulate the minimum amount required for them.

For example, an Ohio driver must have at least $ 25,000 per person and $ 50,000 for each accident as personal injury insurance plus $ 25,000 property damage liability insurance, usually expressed as 25/50 / 25.1 This is only the very minimum;

Motorists can and often should buy additional insurance, especially if they have significant assets that need to be protected from legal action. For example, instead of 25/50/25, the driver can buy 100/300/100 or 250/500/100, which will naturally cost more.

Another factor in the event of collision and comprehensive coverage is the deductible that the insured chooses, meaning the insured must pay out of pocket before his insurance takes effect. And the lower the deductible, the higher your costs. Insurance money. , a policy with a $ 500 deductible will be more expensive than a policy with a $ 1,000 deductible.

How to File a Car Insurance Claim

If you are involved in an accident or your vehicle has been damaged in any other way, you should notify your insurance company as soon as possible, which will assign you a claims evaluator who is responsible for assessing the damage and determining the amount from the insurer. are obligated to pay you in accordance with your policy (if you disagree with the amount, you can dispute it.

Ask your insurance company what information they need to process your claim; For example, it may ask you to send a photo of your damaged vehicle via text message, email, or an insurance company app. You should also keep any documents, for example, police officers. reports, if applicable, and receipts if you need to pay to tow your vehicle. If another driver is involved, you will want to share his name and insurance information with your insurance company.

Your insurer might also additionally have a listing of authorised restore stores that it really works with, despite the fact that you also are unfastened to select your own.

five When your vehicle is repaired, the coverage organization might also additionally pay the store immediately or reimburse you in case you pay. Either way, you may be accountable for overlaying your policy’s deductible.

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