What Is Car Insurance?

By Sharon Gibson Posted in Car Insurance News

How Car Insurance Works

Car insurance is an insurance policy you purchase that protects you from financial loss if you are in a car accident, have your car stolen or if your car is vandalized. In many areas, state law requires car insurance. If you are caught without proper insurance, you will be ticketed and fined.

With car insurance, you pay a monthly, quarterly or semi-annual premium. If you are in an accident, the insurance company sends out an adjuster to appraise the damage to your car. Most insurance companies submit the money, minus your deductible, to the repair shop you’ve chosen, but some will send the money directly to you.

Understanding Deductibles

When you receive a car insurance policy, you set up a deductible for your insurance policy. This works the same way as a co-payment with health insurance. It is the amount you agree to pay as your share following an auto insurance claim.

Most car insurance deductibles range from $0 to $500. Higher deductibles lower your insurance premium.

Liability, Comprehensive, Medical And Collision

Auto insurance policies contain two different coverage’s: Comprehensive and Liability. Each type of coverage offers sub-categories from medical to collision. Medical covers any medical expenses that occur because of an accident. Medical coverage will pay for hospitalization, ambulance service, ER visits and follow-up care. There is usually a maximum limit required by states.

Liability or collision insurance covers damages caused to your vehicle; the other driver’s vehicle, if the accident was your fault; and any damage caused to another person’s property. This might include fencing, a mailbox or the person’s home if your car hits their house, patio or deck. Most medical is listed under your liability insurance.

Comprehensive coverage covers just about anything that occurs to your car that was not the result of an accident. This includes theft, arson, weather or hitting an animal. It covers a rock flying up and cracking your windshield or a tree branch covered in ice that falls onto the roof of your car. Many insurance companies do not consider colliding into an animal a car accident, so liability would not cover those damages to your car.

Other insurance that you should consider are loss of use (insurance pays for a rental while your car is being repaired), uninsured/under-insured motorist (coverage if the other person does not have any or enough insurance), GAP coverage (pays off the loan or lease on your car if it is totaled) and towing.

Related posts:

  1. What Types of Car Insurance Are There?
  2. Which Parts Of A Car Insurance Policy Are Not Required By State Laws?
  3. What Is Comprehensive Car Insurance?
  4. What Is A Car Insurance Deductible?
  5. Collision And Comprehensive Car Insurance; What’s The Difference?

Leave a Reply