Automobile Insurance Fundamentals

Regardless of where in the US you reside, you are required to purchase at least the liability coverage minimums for automobile insurance as set by each individual state. Additional insurance coverage may be required or may be optional; with each state setting it’s own insurance standards that residents must adhere to. The purpose of automobile insurance is to protect you in the event of an accident that causes property damage, personal injuries, or from theft, natural disasters that damage your vehicle, or acts of vandalism.

What is Liability Coverage?

Liability coverage consists of several aspects: Property damage liability: if you cause damage to property or other vehicles, this part of the liability coverage will handle those claims. Bodily injury liability: If you are held responsible for an accident in which another person or persons are injured or killed, this part of the liability coverage will handle those claims. Uninsured/underinsured coverage: While some states have a “no-fault” option, in which your own car insurance covers your losses caused by other drivers who either do not have insurance or don’t have enough to cover the damages, then the uninsured/underinsured coverage of your auto insurance protects you against these situations.

What is Collision Coverage?

Collision coverage is optional in most states, but it may be a good idea to purchase it as it covers you against many different types of claims. Collision will pay to replace your car, or repair it if you are in an accident that causes damage to your vehicle. Comprehensive coverage is what you submit claims under that are not due to automobile accidents- and could include situations such as vandalism, theft, floods or fire. Also within this category are the medical payments/personal injury protection claims. This optional (in most states) coverage will help provide funding for medical expenses that are not picked up by injured passenger or driver’s health insurance coverage.

What You Pay In Addition to Insurance

Some newly licensed drivers who are obtaining insurance for the first time, as well as seasoned veterans who have had insurance for years may believe that if they pay their insurance premiums on time and in full they will not be required to pay anything in the event of an accident or claim. Unfortunately, this is not the case. Almost every insurance plan will require that the insurance holder pay a deductible. A deductible is the amount of money that you pay before the insurance will start covering expenses associated with the claim. The amount will vary based on your particular coverage, and the lower your deductible the higher your insurance premium, and vice versa. Insurance will not cover claims submitted that involve situations where the driver has intentionally caused property damage or injury to others. Insurance also does not protect or cover you against any mechanical failures- you still have to go and pay the garage for repairs! As with any kind of insurance, there is a ceiling to the amount of money an insurance provider will shell out for claims. Expenses that exceed the maximum limits of your coverage will become your responsibility.