Although you may think of yourself as a safe and careful driver, accidents do happen and it can cause both physical and financial damage to yourself and others. Car insurance is a solution that can help mitigate this risk.
What is Car Insurance?
Car Insurance (or vehicle) insurance is a type of insurance that protects you from the financial loss of a car accident, if your car needs to be replaced or repaired.
Car insurance also protects you from the financial liability you may incur, as a result of any physical or property damage caused by your car accident.
Depending on the level of coverage, car insurance can also cover the medical expenses from any personal injury sustained in the car accident.
Who Is It For?
Anybody who owns or drives a car can benefit from car insurance. In almost all US states, there is a legal requirement to have a minimum level of car insurance coverage. This means that is compulsory to have liability insurance.
How Does Car Insurance Work?
When you apply for car insurance, the insurer will assess your risk by looking at a number of factors, such as:
- Age and quality of your vehicle
- Driving experience
- Your reported mileage each year
- Credit score
- Other people who drive your car
Based on this assessment, the insurer will determine your premium (or payment). Also, when you make a claim on your policy you may have to pay an excess (also known as deductible). This is a contribution paid by you when making the claim.
Types of Car Insurance Coverage
There are two parts to liability insurance:
- Bodily injury liability – this covers you for the other party’s medical bills
- Property damage liability – this covers you for the other party’s vehicle repairs
It is important to note that liability coverage doesn’t cover you or your passengers for injury or property damage.
This type of coverage will pay for the repair or replacement of your vehicle due to a collision. This is defined two ways:
- Collision with an object – for example with a house or lamp post
- Collision without an object – for example if your car rolls over
Collision coverage mostly comes as a part of comprehensive coverage.
This insures your vehicle against damage other than from an accident. This includes natural disaster, theft or a falling object (such as a tree branch).
Personal Injury Protection
Also known as ‘no-fault’ insurance, this type of insurance will cover you from all your medical expenses, no matter whom was at fault.
Uninsured Motorist Coverage
This covers you from drivers who break the law and drive uninsured. It will also cover you from drivers who are underinsured, that don’t have enough coverage to pay for all your medical expenses or car damage.
How to Choose the Right Type of Car Insurance
Choosing the right type of insurance depends on your personal circumstances:
- If you’re looking to save money – you can purchase just the minimum level liability insurance required in your state. This is the most riskiest option.
- If you don’t have health insurance – consider personal injury protection insurance. It not only covers you, but your family and other occupants in the car as well.
- If you lease your car, or have a car loan – you may be required to have comprehensive coverage.
- If you have a valuable car – you may also want to consider getting comprehensive coverage.
- If you want complete peace of mind – If you can afford to do so, adding uninsured motorist coverage to a comprehensive plan can give you peace of mind.
Things You Need to Consider When Getting Car Insurance
- Premium vs Excess (Deductible) – You can lower the premium you pay if you increase your excess. Conversely, you can lower your excess by increasing your premium.
- Check rates periodically – insurance is a major expense in any person’s budget, so comparing rates with other insurers every 2-3 years can save you substantial amounts of money.
Having adequate car insurance coverage is an important part of owning a car. It can help you avoid the stress of financial problems, should an accident occur. By doing your research, you will be able to find the right car insurance policy to suit your budget and needs.