If you own a car, you probably have a basic understanding of how car insurance works. As soon as your vehicle suffers or causes any damage, you will need to know even more.
A Primer on Policies
Most states require drivers to have insurance. Even if not required by law, you should have insurance to prevent financial hardship in the event of an accident.
Auto policies have a variety of components to cover different scenarios at different rates. We have explained the most common elements of insurance policies:
Collision coverage provides compensation for damage to your vehicle caused by impact with another vehicle or object.
Covers you for expenses incurred as a result of accidental damage to a vehicle or property – even bodily harm. It also covers lost wages and “pain and suffering” to accident victims. State laws specify the minimum amount of liability coverage you must have on your policy, though you can always pay for more than the minimum coverage.
Comprehensive coverage kicks in for loss or damage to the insured vehicle that is not the result of an auto accident. Covered causes generally include fire, hail, flood, and wind damage, as well as theft or vandalism.
This coverage pays medical expenses caused by an auto accident. It applies regardless of fault.
Some states require Personal Injury Protection (PIP). PIP covers accident-related medical expenses for the insured driver, regardless of fault.
Damage caused by drivers who don’t have insurance or who have insufficient insurance are covered by these types of policies.
This coverage typically provides a daily allowance toward car rental while your car is being repaired after an auto accident.
As you select auto insurance, be sure you know the answers to two questions: 1) What does my state require? and 2) How much coverage do I need in order to ensure that I don’t have to pay thousands of dollars out of pocket in the event of an accident.
Do a Review
If you purchased your car insurance long ago, be sure to review it periodically. While your auto policy may not be high on your list of things you want to read in your free time, a few minutes spent refreshing your memory on your coverages will be time well spent if you find yourself in the stressful aftermath of an auto accident.