Why Auto Insurance?

Car Insurance, similar to any other type of insurance, is a financially protective measure.  You pay your insurance provider a premium in exchange for a insurance policy so you can drive with peace of mind knowing that in the event of an accident you are covered.

What Happens if I Have an Accident?

In addition to knowing what exactly car insurance is, you have to know how accidents can affect it. The truth is that your car insurance rate typically goes up after an accident. After an accident, you may notice an increase in your premium for a variety of reasons. For one, you may be placed in a higher risk pool; this means that your insurer will reassess your rate of risk and may raise your rates depending on the circumstances. Furthermore, a car accident will likely disqualify you for a safe driver discount. Lastly, an erasure of premium benefits means that you are no longer protected from an increase in the rate the second time around. Something else you need to be aware of when it comes to car insurance and accidents is your deductible. Deductibles are an out-of-pocket cost that you will be responsible for if you file a claim with your insurance. The higher your deductibles are, the lower your premiums will be. If you want to be responsible for the lowest possible out-of-pocket expense in the event of an accident, you can pay a higher monthly premium.

A comprehensive guide for car insurance would never be complete without introducing to you some of the basic types of car insurance. By identifying different types of coverage, you are better equipped to choose the right one for you. Furthermore, going through this list will give you ample knowledge as to how each works and which policy would benefit you the most. Here are the different types of car insurance:

Liability Coverage

Liability coverage is fairly easy to understand. If you are at fault for a car accident, it is your obligation to cover the car repairs of the other driver. If you have liability insurance, your insurance provider will pay these obligations on your behalf. If you have liability only, your car repair expenses and medical bills are not covered by your insurance company.

Bodily Injury Liability

Two drivers talking next to cars after collisionOne of the sub-categories of liability coverage is bodily injury. This type of liability insurance is required by law in most states. If you are at fault for a car accident that injures another person or driver, this liability coverage will help in paying for his/her medical expenses and a loss in income due to his/her injury. Furthermore, bodily injury liability insurance can also aid in paying for any legal fees if you are sued.

The second sub-category of liability coverage is property damage. This type of liability insurance is quite similar to bodily injury liability, with the only difference being that it focuses on property damages rather than bodily injuries. Whether it is another car or another person's property, this type of coverage can help with the repair expenses.

Uninsured or Underinsured Motorist Coverage

This type of insurance comes into play if you are in an accident where the other driver is at fault and s/he does not carry any type of car insurance. If this occurs, you can file a claim with your own insurer up to the limit of your uninsured driver coverage. Underinsured driver coverage can be used the same way. The difference with underinsured coverage is that the driver at fault does have some coverage, but it is not sufficient to cover all of the damages.

Personal Injury Insurance

Patient with bandaged wrist visiting doctor
Personal injury insurance, also known as PIP or personal injury protection, typically covers your medical expenses and lost wages. This type of insurance is also referred to as no-fault coverage because it pays out the claim, regardless of which driver was at fault. If you’re in an accident and you have PIP, you can still receive the benefits, no matter who is at fault. This type of insurance also covers service replacement of someone injured in a car accident, rehabilitation costs, and funeral costs.

Collision Insurance

Collision insurance covers the repair or replacement of your vehicle if you are involved in an accident with another vehicle or an object, such as a tree or a fence. It also covers single vehicle accidents. On another note, this insurance does not cover damages not related to driving, damages to another person’s vehicle, and any medical bills, whether they are yours or someone else’s. Collision coverage is likely required if you owe money on your car or have it leased. If your car is paid for in full, you can choose whether or not you carry collision insurance. You should consider how much it would cost to replace or repair your car in the event of an accident when deciding whether or not to carry collision insurance.

Comprehensive Insurance

Comprehensive insurance is considered one of the highest forms of protection that a driver can get. Comprehensive car insurance helps cover the cost to repair or replace your vehicle if it’s stolen or damaged in an incident that is not a collision. Comprehensive coverage would cover damage from fire, vandalism, falling objects, or natural disasters. Like collision insurance, if you owe money or have your vehicle leased, comprehensive coverage is likely required by your lien company. If your vehicle is paid in full, you can choose whether or not you carry comprehensive insurance.

Medical Payments Insurance

This type of coverage is part of an auto insurance policy and may help pay your or your passengers’ medical expenses in the event of an auto accident. This type of insurance can be implemented regardless of who caused the accident. It may cover hospital or doctor visits, surgery, x-rays, prostheses, ambulance, medical technician expenses, professional nursing services, and health insurance deductibles. Keep in mind that this type of coverage is optional and is not available in all states.

Rental Reimbursement helps cover the cost of transportation, whether you rent a car or take public transportation, while your vehicle is being repaired after an insurance claim. This type of coverage does not apply if you need to rent a vehicle to be used while on vacation or if your vehicle requires routine maintenance work. Rental reimbursement only applies if your vehicle is involved in a covered insurance claim.

Roadside Assistance Coverage

Roadside assistance coverage is a type of coverage that can help when you have car trouble, whether you’re at home or on the road. Adding roadside assistance coverage to your insurance plan comes with several benefits: towing, lockout service, extrication, flat tire service, fuel delivery, and battery service. Roadside assistance is an option that may be available to add in with your auto insurance policy or purchased separately.