What is auto insurance?
Most states require basic personal automobile insurance, which offers financial protection in the event of an accident. Is it, however, sufficient? What are your choices? Learn about auto insurance and the various types of coverage that are available. The fundamentals of automobile insurance In the event of an accident or theft, automobile insurance is a contract between you and the insurance company that protects you financially. The insurance provider promises to pay your losses as stipulated in your policy in exchange for you paying a premium. The following items are covered by automobile insurance: Damage to or theft of your car is an example of property. Liability is your legal obligation to others in the event of bodily harm or property damage. Medical - the cost of treating injuries, rehabilitation, and lost wages, as well as burial costs. Most states in the United States require basic personal auto insurance, while the rules vary. Individually priced auto insurance coverages (a la carte) allow you to tailor coverage amounts to your specific needs and budget. Policies are often given for six months or a year and are renewable. When it's time to renew your coverage and pay your payment, the insurance provider will send you a notice. Who is covered by my motor insurance policy, and under what conditions? Whether you're driving your own car or someone else's, your auto policy will protect you and other family members (with their permission). Your policy also covers you if you allow someone who isn't on your policy to drive your car with your permission. Whether you're commuting to work, conducting errands, or taking a trip, your personal auto coverage only covers personal driving. If you use your automobile for business activities, such as delivering pizzas, it will not provide coverage. If you use your automobile to offer transportation to others through a ride-sharing service like Uber or Lyft, your personal auto insurance will not cover you. However, several motor insurers are also offering (at an additional fee) supplemental insurance packages that provide coverage to vehicle owners who provide ride-sharing services. Is auto insurance a legal requirement? State-by-state auto insurance requirements differ. If you're getting a car loan, your lender may have additional criteria. Almost every state mandates that car owners have: Bodily injury liability - this insurance covers the costs of injuries or deaths caused by you or another motorist while driving your car. Property damage liability pays for damage caused by you or another driver in your automobile to another vehicle or other property, such as a fence, structure, or utility pole. Furthermore, many states mandate that you carry: Medical payments, often known as personal injury protection (PIP), are a type of insurance that reimburses you for medical expenses incurred by you or your passengers. It will also reimburse missed wages and other costs associated with the situation. When an accident is caused by a driver who does not have auto insurance—or in the instance of a hit-and-run—uninsured motorist policy reimburses you. You can also buy underinsured motorist coverage, which will pay for expenses if another driver does not have enough insurance to cover the costs of a major collision. Even if personal injury protection (PIP) and uninsured motorist coverage are optional in your state, consider adding these to your policy for added financial security. What are the most common types of automobile insurance coverage? While most basic, legally required auto insurance covers damage caused by your vehicle, it does not cover damage to your own vehicle. Consider the following optional coverages for your own car: When you're at fault, collision insurance pays for damage to your car caused by a collision with another vehicle or another object (such as a tree or guardrail). While collision coverage does not cover mechanical failure or normal wear and tear, it does cover damage caused by potholes or rolling your automobile. Comprehensive coverage protects you from theft and damage caused by events other than collisions, such as fire, flood, vandalism, hail, falling rocks or trees, and other hazards—even an asteroid strike! Windshield damage is a typical occurrence, and Glass Coverage protects you from it. Glass coverage with no deductible is available on some auto policies, and it covers side windows, rear windows, and glass sunroofs. You can also purchase additional glass coverage. I'm not sure what gap insurance is or if I need it. Collision and comprehensive insurance only cover the market worth of your automobile, not the price you paid for it, and new cars depreciate rapidly. There may be a "gap" between what you owe on the vehicle and your insurance coverage if it is totaled or stolen. To cover the difference, you may want to consider obtaining gap insurance. Gap coverage is frequently integrated into your lease payments for leased autos.