CAR INSURANCE

Car insurance is a contract between a policyholder and the insurance company that protects the policyholder against financial loss in the event of an accident or loss. In exchange for your paying a premium, the insurance company agrees to pay your losses as in your policy.

In essence, car insurance provides you coverage for; damage to or theft of your car, your legal responsibility to others for bodily injury or property damage, as well as the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses and even cover you reimburses you when an accident is caused by a driver who does not have auto insurance—or in the case of a hit-and-run. You can also purchase under insured motorist coverage, which will cover costs when another driver lacks adequate coverage to pay the costs of a serious accident.

TYPES OF CAR INSURANCE

When it comes to car insurance, the three main types of policies are liability, collision, and comprehensive. Mandatory liability coverage pays for damage to another driver’s vehicle. Not all states require collision and comprehensive, but even if you own your vehicle outright, you should consider adding this coverage.

Collision coverage pays for damage done to your vehicle in an accident, regardless of fault. Comprehensive insurance coverage pays for damage from a natural disaster or vandalism.

While most basic, legally mandated auto insurance covers the damage your car causes, it does not cover damage to your own car. To cover your own car, you should consider this optional coverage:

Collision reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object—e.g., a tree or guardrail—when you’re at fault. While collision coverage will not reimburse you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car.

Comprehensive provides coverage against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, hail, falling rocks or trees and other hazards—even getting hit by an asteroid!

Glass Coverage provides coverage from windshield damage, which is common. Some auto policies include no-deductible glass coverage, which also includes side windows, rear windows and glass sunroofs. Or you can buy supplemental glass coverage.

Other types of car insurance

Umbrella policy

This can provide coverage regarding large liability claims. For instance, if you cause an accident while driving, the other driver might make a claim against you for $750,000. Your auto policy only covers up to $500,000. The umbrella policy covers the difference.

Medical payment coverage and personal injury protection

 This coverage can help pay for medical bills you might incur if you’re involved in an accident. It might also cover your passengers’ expenses and pay for hospital visits, surgery, and doctor’s bills.

Uninsured motorist/ underinsured motorist

Even though liability coverage is a legal requirement, some people may drive without it. This policy covers anything the other driver doesn’t carry if they are at fault for the accident. Some states require motorists to carry this coverage.

Underinsured motorist is similar to uninsured coverage. This policy covers damages or injuries you sustain from a motorist who doesn’t carry enough coverage.

Motorcycle coverage

 This is a policy specifically for motorcycles because auto insurance doesn’t cover motorcycle accidents.

The Benefits of Car Insurance

Car accidents happen all the time, no matter where you drive.  If you cause a car accident, you might be responsible for any costs associated with it. This includes legal fees, medical expenses, and lost income. Without certain types of coverage, you would likely pay for these costs out of your pocket. Also, if your vehicle is damaged, the insurance covers the cost to either replace or repair it.

1. One important benefit of insurance is that you’ll pay less if you’re involved in an accident, especially a large one.
2. Car Insurance also helps you avoid the devaluation of your vehicle. Some policies help to prolong the value and life of your vehicle. You can’t avoid natural disasters such as a hailstorm from damaging your vehicle. But comprehensive insurance can lower the losses you incur and save you money in the long run.
3. It also gives you peace of mind to know that your policy protects your family against monetary losses. Without insurance to cover the costs, it might be difficult to pay for repairs to your vehicle.
4. Car insurance also protects you against a lawsuit, even if you cause significant damage to someone’s property. The insurance safeguards you and helps you with claims that others make against you in accidents. It also covers legal costs.
5. Some insurance companies offer a no-claim bonus (NCB) in which eligible customers can qualify for every claim-free year. The NCB might be offered as a discount on the premium, making car insurance more affordable.

WHAT CAR INSURANCE COVERS AND THE CIRCUMSTANCES

Car insurance policy will cover you and other family members on your policy, whether driving your car or someone else’s car (with their permission). Your policy also provides coverage if someone who is not on your policy is driving your car with your consent.

Your personal car insurance policy only covers personal driving, whether you’re commuting to work, running errands or taking a trip. It will not provide coverage if you use your car for commercial purposes—for instance, if you deliver pizzas.

Personal car insurance will also not provide coverage if you use your car to provide transportation to others through a ride-sharing service such as Uber. Some auto insurers, however, are now offering supplemental insurance products (at additional cost) that extend coverage for vehicle owners providing ride-sharing services.

IS CAR INSURANCEE COMPULSORY

Auto insurance requirements vary from state to state. If you’re financing a car, your lender may also have its own requirements. Nearly every state requires car owners to carry:

What Affects Car Insurance Premiums?

You might wonder why car insurance prices vary so much. Several factors affect the costs:

Age of the vehicle: Oftentimes, an older vehicle costs less to insure compared to a newer one. New vehicles have a higher market value, so they cost more to repair or replace. Parts are easier to find for older vehicles if repairs are needed.

Make and model of vehicle: Some vehicles cost more to insure than others. Luxury and sports cars usually have highesr insurance premiums because their market values are higher.

Risk of theft: Certain vehicles regularly make the frequently stolen lists, so you might have to pay a higher premium if you own one of these.

Meaning of gap insurance in car insurance

Gap insurance in car insurance entails an elective car insurance policy which helps to pay off car loans in the event the car for which you have not paid up its loan is lost or damaged. It operates as Supplemental car insurance for your car loan. For instance, if your car sustains damages in an accident and your comprehensive policy does not pay up to the value you owe your lender, the gap policy will step in to make up the difference.

This is because collision and comprehensive only cover the market value of your car, not what you paid for it. And new cars depreciate quickly. If your car is lost, there may be a “gap” between what you owe on the vehicle and your insurance coverage. To cover this, you may want to look into purchasing gap car insurance to pay the difference. However, for cars on leasehold, the gap coverage is usually factored into your lease payments.

Conclusion

The benefits of car insurance far outweigh the risks as you could end up paying thousands of dollars out-of-pocket for an accident you cause. It is therefore of immense benefit that you purchase your car insurance policy on time. Also make sure to examine your policy closely to know exactly what type of coverage you have. And consider adding other policies if needed. It’s usually better to have more coverage than not enough