Insurance for Autos Explained
Car insurance is essentially an agreement made between a vehicle owner and the insurance provider where the driver is protected against financial loss resulting from accidents. The owner of the covered vehicle pays a monthly amount, known as a “premium,” to receive the insurance coverage. These policies are normally renewed every six months or annually. (Within the policy details one can determine what kinds of losses are covered and other important details.)
The Six Kinds of Coverage:
• Property Damage Coverage – This is what pays for damages or for theft of a covered vehicle. This protection is also extended to damages to another individual’s property.
• Collision Coverage – This compensates for losses due the insured person’s vehicle hitting another vehicle or an object like a telephone pole.
• Comprehensive Coverage – This is what provides protection for a range of damages that involve losses derived from accidents and actions outside of collisions, such as theft or vandalism and more.
• Bodily Injury Liability Coverage – This covers medical expenses of others injured in an accident that was the result of the policyholder. This also compensates for legal assistance for the insured driver if he or she caused bodily injuries and property damage to the other driver.
• Medical Coverage– This extra protection allows for payment of medical expenses of the policyholder and passengers. It can also compensate for rehabilitation, funeral costs and even lost wages.
• Uninsured or Underinsured Motorist Coverage – With this component, the covered driver obtains compensation if the other (at fault) driver either has insufficient or no insurance to pay for the insured driver’s needs.
Keep in mind that drivers are not mandated buy all six of the above kinds of coverage, but most states do have regulations for drivers to carry bodily injury liability coverage. In states that don’t mandate this coverage, they will need drivers to prove that they have enough assets to handle claims up to a certain level, if they are responsible for an accident. All states maintain some kind of financial responsibility law, which enforce a minimum coverage level should drivers not have the ability to properly pay for potential claims. Also, banks and credit unions usually require drivers to carry full coverage (including collision and comprehensive) to approve an auto loan.