What is auto insurance?

Understand your car insurance and what it involves- Some states require basic personal auto insurance and provide some financial protection in the case of an accident. But is this enough? What are the possibilities? Know-how and what type of coverage is required for car insurance.

Understanding Auto Insurance - The Basics

Auto insurance is a contract between you and the insurance company that protects you from financial loss in the event of an accident or theft. In return for paying your premium, the insurance company agrees to pay your loss, as stated in your policy. 

Auto insurance provides cover for the following:

Property - such as damage or theft of your car.

Liability - Your legal liability to others for bodily injury or property damage.

Medical - The cost of treatment of injuries, rehabilitation and sometimes wages and funeral expenses.

Many US states require basic personal auto insurance, although laws vary. Auto insurance coverage is priced individually so that you can customize the amount of coverage to suit your exact needs and budget.

Policies are usually issued for six months or one year and can be renewed. When it is time to renew the policy and pay the premium, the insurance company sends a note. 

Who is covered by my auto insurance - and under what happenings?

Your auto insurance will protect your life with you and other family members, whether driving your car or driving someone else's car (with their permission). If apart from your consent, your policy provides your policy to someone other than driving your vehicle.

Your auto policy only includes own driving, whether you are commuting to work, driving, or traveling. If you use your vehicle for commercial purposes, it will not provide coverage - for example, if you deliver pizza.

Additionally, personal auto insurance will not provide coverage if you use your vehicle to transport it through a ride-sharing service such as Uber or Lyft. Nevertheless, some auto insurers now offer additional insurance products (at an additional cost) that extend coverage for vehicle owners providing ride-sharing services.

Is auto insurance coverage mandatory?

Guidelines in auto insurance vary from state to state. If you are financing the car, your lender may also have its requirements. Almost every state requires car owners to carry:

Bodily injury liability - which covers the costs associated with injuries or death that you or another driver incurs while driving your car.

Property damage liability - which reimburses others for damage to another vehicle or other property, such as a fence, building, or electric pole, caused by you or your driver driving your car.

Additionally, many states require that you carry:

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

Motorist coverage reimburses you without a license when an accident does not occur to the auto driver, or in the case of a hit-and-run accident. You can also purchase under the insured motorist coverage, which will cover the cost of another driver who lacks enough coverage to pay the costs of a severe accident.

Even if your state is optional for motorists with PIP and unlicensed, consider adding them to your financial security program.

What are the specific types of auto insurance?

Although the simplest legally mandated auto insurance covers damage to your vehicle, it does not cover the damage to your car. To protect your vehicle, these optional coverings should be considered:

Collision coverage - A collision will reimburse you for damage to your car when you accidentally result in a collision with another vehicle or other objects, such as a tree or railing - when you are at fault. While collision coverage will not compensate you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car.

Comprehensive coverage – A comprehensive gives coverage against theft and damage caused by accident other than a collision, such as fire, vandalism, floods, hail, falling rocks or trees and other hazards - even being hit by an asteroid!

Glass coverage - Glass coverage provides general windshield damage coverage. Most auto plans include side-windows, back windows, and glass sunroofs, as well as no-deductible glass coverage. Or you can purchase additional glass coverage.