Car insurance offers some financial protection against other losses involving your vehicles, like theft and weather-related vehicle damage, as well as collision-related costs, including those resulting from lawsuits.
Your auto insurance provider agrees to cover losses specified in your policy when you pay your premium.
Is Auto Insurance Required?
In almost every state, having auto insurance is mandatory. You must be able to pay for all of the expenses if you are at fault for an accident that results in someone else suffering physical harm or having their property damaged. This covers paying for any judgments and settlements that come from a lawsuit against you, as well as your legal defense if you are sued for causing an accident.
Due to financial responsibility laws in most states, you must provide proof that you have the financial means to cover any damages and medical expenses you may incur in the event of an accident before you are allowed to drive. If you cannot provide evidence of your assets, you may be subject to fines and even have your driver's license and car registration revoked. Also, your savings might be lost if you cause an accident and you do not have liability auto insurance.
Vehicle insurance aids in asset protection.
To finance or lease a vehicle
To safeguard their investment in your vehicle, lenders or leasing companies might insist that you purchase comprehensive and collision insurance. If your car gets damaged or destroyed, having both coverage types ensures they can recover their losses.
Gap insurance may be mandatory by car leasing companies. This kind of coverage bridges the difference between the amount you pay off on your lease and the amount your insurance company gives you for the totaled value of the car.
To prevent having to pay for accident-related costs out of pocket
Your liability insurance can assist in paying for other people's medical expenses and vehicle repairs when you are at fault for an accident that results in property damage or bodily harm.
Your legal defense expenses are covered by liability insurance if you are sued for causing the accident.
If you don't have enough liability insurance, you might be responsible for any costs over the limits of your policy.
To cover the costs of your passengers' and your own injuries
After an accident, auto insurance can assist with the cost of medical care and surgery for you and your passengers. The last thing you probably want to deal with after an accident is a big hospital bill.
To cover damages to your own car
Numerous dangers, such as road debris and mother nature, can harm your vehicle. Having adequate coverage for your own car can help with auto repairs, even though state-mandated liability insurance can cover damage to other drivers' vehicles in the event of an accident.
What Is Covered by Auto Insurance?
A policy for auto insurance typically combines various types of coverage. Some are typically required by law, while others are not. Because of this, auto insurance companies allow you to alter your policy to suit your requirements and financial situation.
These are some common choices for auto insurance coverage.
Insurance against liability
Liability insurance pays for the costs of treating injured parties and repairing property damage you cause to other people if you are at fault for an accident. In the event that you are sued for damages following an accident, it may also pay for your legal expenses, including attorney fees.
Generally speaking, you should purchase enough liability insurance to replace any potential losses from a lawsuit. Though most states mandate liability insurance, each state has different requirements for the exact amount.
Insurance for personal injury protection or medical payments
Medical payments coverage, sometimes known as MedPay or PIP insurance (PIP), can cover you or your passengers' medical expenses after an accident, regardless of who is at fault. Although these are comparable, PIP provides more extensive coverage. PIP typically pays for lost income, medical costs, burial expenses (if applicable), and assistance in performing daily tasks for the injured person.
Each state has different MedPay and PIP availability.
coverage for underinsured and uninsured drivers
Not every driver has sufficient auto insurance. Because of this, insurance companies provide underinsured or uninsured motorist coverage to protect you in the event that someone collides with your vehicle and their liability insurance is insufficient to cover your injuries or the damage to your car.
Coverage for collisions
After a collision, your own car is covered by collision coverage. Collision coverage can assist with covering the cost of repairs for any object or vehicle that your car hits. Collision coverage reimburses you the full retail value of your car, less any applicable deductible, in the event that it is totaled.
All-encompassing protection
Crash-related damage to cars is not always the cause. Natural disasters, theft, and vandalism can also cause damage. For instance, comprehensive auto insurance will cover the cost of repairs if a tree falls on your car while it is parked in your driveway. Comprehensive insurance would reimburse you for the car's market value at the time of the incident, less your deductible, if your car is a total loss.
Additional coverage
Numerous auto insurance providers also provide extra choices such as:
Your policy may provide rental reimbursement to cover the cost of a rental car while your car is being repaired following an accident.
In the event that your car is stolen or totaled, gap insurance will pay the difference between the amount you still owe on the loan and the value of your vehicle.
If you find yourself stranded on the side of the road, roadside assistance can help.
