How Does Car Insurance Work?
Car insurance is designed to protect you financially in the event of an accident. If a tree falls on top of your vehicle or you are the victim of a runaway collision, auto insurance can help pay for the cost of repairing your car and treatment for your injury. It also provides liability protection, if you are responsible for an accident that causes injury or property damage to others.
Understanding how auto insurance works can help ensure you have proper coverage and avoid surprises if you file an insurance claim.
What is Car Insurance?
Auto insurance provides financial protection from costs related to collisions—including those from lawsuits—and other losses involving your vehicle, such as theft and weather damage.
When you pay your car insurance bill, your car insurance company agrees to pay for the losses described in your policy.
Do You Need Car Insurance?
Almost all states require that you have auto insurance. If you are responsible for an accident that causes bodily injury or property damage to others, you need to be able to pay all bills. This includes paying for your legal defense if you are sued for an accident you caused and any judgments and settlements resulting from a lawsuit against you.
Most states have financial liability laws, which means—to drive legally—you'll need proof that you can afford damages and medical bills if you cause an accident. Without proof of assets, you can face legal penalties such as termination of your driving license and vehicle registration. And if you cause an accident and don't have liability auto insurance, it can potentially eat up your savings.
Car insurance helps protect your assets.
To rent or finance a car
Lenders or rental companies may sue you to purchase comprehensive insurance and collision insurance to protect their interest in your car. Asking for both types of coverage ensures they can recover their losses if your car is damaged or destroyed.
The car rental company may require you to purchase gap insurance. This type of coverage pays the difference between the amount you owe on the rental car and the amount you receive from your insurance company for the value of the vehicle if the car totals.
an accident resulting in bodily injury or property damage, liability insurance can help cover the cost of medical treatment and other people's repair costs.
If you are sued for causing an accident, liability insurance also pays for your legal defense costs.
Without adequate liability insurance, you could be liable for costs that exceed your policy limits.
To pay for your and your passengers' injuries
If you or your passengers are injured after an accident, car insurance can help pay for doctor visits and surgeries. After an accident, the last thing you want is to be sued for a hefty hospital bill.
To pay for damage to your own vehicle
From natural disasters to road debris, many hazards can damage your car. While state-mandated liability insurance can pay for repairs to another driver's vehicle in an accident, having adequate coverage for your own vehicle can help pay for vehicle repairs.
What Does Car Insurance Cover?
An auto insurance policy is usually a combination of several types of coverage. While some are usually required by law, others are optional. For this reason, auto insurance companies allow you to customize your policy according to your needs and budget.
Here are some standard auto insurance coverage options.
Liability insurance
If you are responsible for an accident, liability insurance covers the cost of medical treatment for the injury and repairs for property damage you cause to others. It can also cover legal costs such as attorney's fees if someone sues you for damages after an accident.
You usually want to purchase sufficient liability insurance to cover what you could lose in a lawsuit. While most countries require liability insurance, the exact limit requirements vary by state.
Medical payments or personal injury protection
It doesn't matter who is at fault in an accident, medical payment coverage—sometimes called MedPay—or personal injury protection insurance (PIP) can pay for injuries to you or your passengers. Even though the two are similar, PIP offers
Posting Komentar untuk "How Does Car Insurance Work?"