If you are a motorist, you probably already know that auto insurance is required by law. In fact, 47 states in the U.S. have made having some kind of car insurance mandatory. But why?
The fact of the matter is that car accidents are more common than you think, and they can be extremely costly if someone is injured or the cars are damaged.
Car insurance is a way for drivers to mitigate the potentially devastating financial implications that come with car accidents – whether they involve hospital bills, written-off vehicles, or property damage.
Here’s how car insurance works and why every driver needs it.
Types of Coverage
When you purchase auto insurance, what is covered will be defined in your policy. Policies vary in price depending on a variety of factors. Some factors that affect your policy include your age, the car you drive, and what you need to be covered.
Car insurance policies are packages of different types of coverage. Although the legally required amount of coverage varies by state, the minimum coverage is required by law in 47 states. Many people opt for additional coverage to protect themselves in the event of a car accident.
Liability Coverage
Liability coverage is usually the minimum amount of coverage – even the cheapest car insurance policies should cover liability.
Liability is third-party coverage because it pays for injuries to other drivers and their property. Liability coverage covers medical bills, lost wages, and pain and suffering. It also covers legal expenses like defense and court costs.
Collision Coverage
Collision coverage will cover the damages to your vehicle if you collide with another driver or object.
Comprehensive Coverage
Comprehensive coverage covers the damage or total loss of your vehicle – even if it doesn’t involve a car accident. Comprehensive coverage will cover the damage or loss of your car due to vandalism, theft, fire, or floods.
Medical Coverage
Medical coverage will cover the medical expenses incurred as a result of a car accident – whether the insured is found to be at fault or not.
Personal Injury Protection
Personal injury protection covers the medical expenses of the insured driver when they occur as a result of a car accident – whether the driver was at fault or not. Personal injury protection is required by law in some states.
Uninsured Motorist
Uninsured motorist coverage will cover the damages to your vehicle when the other at-fault driver does not have liability insurance.
Underinsured Motorist
Underinsured motorist coverage will cover the damages to your vehicle when the other at-fault driver does not have sufficient liability coverage on their insurance.
Rental Reimbursement
Rental reimbursement coverage will cover the costs of a rental car while your vehicle is undergoing repairs due to a car accident. This coverage usually stipulates a daily allowance for a rental car.
Final Words
Many people opt for additional coverage that extends beyond their state’s minimum insurance laws.
Purchasing more coverage than the prescribed minimum is a way to protect yourself from a variety of issues that might arise after a car accident – including damage to your car and your medical bills if you are injured. The extra coverage is well worth the expense.