What is auto insurance?
Understanding auto insurance—the basics
Auto insurance is actually an agreement between you and the company you are purchase insurance from for your protection in times of financial loss if you are unlucky to suffer a theft of accident. As a response to your premium payment, the insurance company enters a contract to take responsibility of paying for your losses as per the agreed outline given in your policy.
Auto insurance covers:
Property – like as theft of or damage your car or vehicle.
Medical – the expenses on treatment injuries, restoration and/or in certain cases lost wages and expenses required for funeral and burial.
Liability – your duty required by the law for personal body injury or property damage of other persons.
Basic personal auto insurance is authorized by most of the states in the U.S., and these laws vary in various aspects. Auto insurance coverages have different and individual prices to help you adjust and fine tune the coverage amount suitable to your budget and needs.
Generally, policies are for valid for six-month and/or one-year which can be renewed via an easy process. The insurance company will send you an alert notice well before the expiry date to inform you about the need to renew and pay your premium if you want to continue.
Auto insurance covers whom—and when?
You and your family members will get coverage from your auto policy, while they are driving your car or somebody else’s car. Your policy also covers you and your car if someone else, not on your policy, drives your car with your permission.
Your personal auto policy covers you in all events whether you’re on a personal driving, but also if you’re running errands, commuting to work or taking a usual trip. However, it will not cover if your car is used for some commercial purpose—for instance, if you make home delivery for commercial purposes.
Likewise, your personal auto insurance will also not cover if you use your car for the purposes of paid or free transportation through a ride-sharing service such as online taxi—Careem or Uber. Though some auto insurers offer supplemental insurance products with extra charges which extend coverage limit and range for car owners who give the services of ride-sharing.
Is auto insurance coverage required by the law?
The requirements of auto insurance are different in different states. Your lender also has their own requirements if you’re financing a car through some company or individual. Almost every state makes it binding on car owners to have:
Property damage liability –pays for damage that you or another person driving your car does to another car or some other belonging, like a building, fence, or utility pole etc.
Bodily injury liability – which covers expenses related to death or casualties caused by you or another driver driving your car.
Additionally, many states want you to carry:
Uninsured motorist coverage pays you when driver cause an accident who doesn’t have an auto insurance and who drives your car—or is involved in a hit-and-run. You can buy under insured motorist coverage also, which covers expenses when another driver has a lower range and insufficient coverage to bear the expenses of a much bigger and sever accident.
Personal injury protection (PIP), which cover your payment for medical bills for injuries sustained you or your passengers. This also covers lost wages and other expenses related to the case.
Other typical types of auto insurance coverage
Although the most basic policy, legally directed auto insurance will cover the impairment caused by your car, it does not cover damage done to your own car. For that purpose, consider the following optional coverages:
Comprehensive gives coverage in case of theft and damage received as a result of an incident, but not a collision, like vandalism, fire, flood, falling rocks, hail or trees and other threats.
Collision covers and repays you for injury to your car that comes in case of a collision when the fault lies with you.
Glass Coverage covers you in case of the windshield damage, which is quite usual. Some auto policies provide no-deductible glass coverage, including rear windows, side windows, and glass sunroofs. For that purpose, you may buy supplemental glass coverage.
What is gap insurance; is it mandatory?
Comprehensive and Collision cover only the market value of your car, not your paid value for it. If your car suffers a theft or is totaled, there comes a wide and significant “gap” between what you owe on the car and your insurance coverage. Thus, you may want to look into procuring gap insurance to adjust and minimize the difference.
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