Car Insurance is effectively a contract between yourself and an insurance company in which you agree to pay premiums in exchange for protection against financial losses stemming from an accident or other damage to the vehicle
Car Insurance can offer coverage for:-
• Vehicle damages, including your car or another driver's vehicle
• Property damage or bodily injuries caused by an accident
• Medical bills and/or funeral expenses associated with injuries sustained in an accident.
The exact details of what's covered depend on the minimum coverage requirements for your state and any additional coverage options you choose to include. Every state except New Hampshire requires drivers to have a minimum amount of bodily injury liability coverage and property damage liability coverage.
Failing to obtain the minimum car insurance required by the laws in your state could result in a suspension of your license, fines or even jail time for repeat offenses.
Car Insurance Costs
There are two primary costs associated with purchasing car insurance:-
1. Premiums
2. 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. 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.
Ask your insurance company about ways you may be able to lower your car insurance rates, such as getting a safe driving discount or taking a defensive driving course.
How Car Insurance Works
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 time frames 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.
A number of states go a step further, mandating car owners carry medical payments or personal injury protection (PIP), which reimburses medical expenses for injuries sustained by you or your passengers. It will also cover lost wages and other related expenses.
Uninsured motorist coverage reimburses you when an accident is caused by a driver who does not have Car Insurance. Under insured motorist coverage is designed to protect you when you're involved in an accident with a driver who has some insurance but not enough to cover the full cost of a claim.