Auto insurance is actually a legal contract between you and the insurer that pays you a specified amount in the event of a vehicle accident or other type of loss. In return for your paying a regular premium, the insurer agrees to cover your damages as outlined in your coverage. There are two main types of auto insurance: collision and comprehensive. Each has its own set of rules and regulations governing how it works. Comprehensive covers you in case you’re involved in a total loss situation, where the cost to replace your vehicle is greater than its value. This includes damage caused by fire, theft, vandalism, weather, and more.
Collision auto insurance covers you in the event you are in an accident. What does that mean? Basically, if you get into an accident with another vehicle, your auto insurance company will pay the price of the vehicle that was damaged or stolen, less the deductible you have on your own auto insurance policy. You can choose to either pay the whole amount of the deductible, or you can reduce it by a certain percentage.
Depending on the type of coverage you have in your auto policy, you may not need to get uninsured motorist protection. Simply put, uninsured motorist coverage kicks in if you are in an accident with somebody who is driving without adequate insurance. A portion of your premium will go towards this coverage. If you want this coverage, you’ll need to increase your deductible.
Another major type of coverage that you can add is physical damage coverage. This will cover any expenses associated with injuries to you or another party in an automobile accident, as well as medical expenses you might be required to incur due to being injured. The medical costs portion of this coverage varies depending on the type of injury you have sustained. Some people simply receive hospitalization and are released from their own car accident with no additional medical expenses to be paid.
There is another way you can save money when shopping around for auto insurance. Rather than taking the insurance premiums you are paying every month out of pocket, you can shop around and take out a policy for each individual vehicle in your fleet. By doing so, each individual insurer you deal with for your vehicles’ coverage will give you a form you can fill out in order to request a discount. You will have to pay the same amount of premium that you did before, but the insurer will give you a much lower rate based on the volume of coverage you have already arranged for.
Many car owners, especially new ones, don’t realize that they are required to have liability insurance on their cars when they first purchase them. If the car is financed through a bank or other lender, the lender requires you to have at least bodily injury and property damage liability insurance as part of the loan agreement. Even if the loan is from a non-traditional lender, such as a credit union or the “The Big Three” (Jaguars, Managers, and banks), your lender or company may still require you to have the above types of insurance.
Bodily injury is the most common type of liability insurance policy. It covers costs for accidents that occur to you as the result of another person’s negligence. Property damage liability, on the other hand, pays for damages to another person’s vehicle or their property if you are at fault in an accident. This is the most common type of policy that covers medical expenses, but any injuries you suffer in an accident will also be covered. These policies are usually the cheapest because they only pay out for actual cash damages.
The third type of policy that you should consider is personal injury protection or PIP. PIP pays for lost wages, funeral expenses, pain and suffering, and various other disability aids that a person may need after being injured in an accident. In the case of a bodily injury PIP usually covers all medical and funeral expenses, but a PIP policyholder may also receive other benefits depending on their age and how much coverage they have requested.