How Does Car Insurance Work: A car policy can cover many different risks and protect you financially, The role of car insurance is to help cover bills and protect you from potentially devastating financial liability.
Car accidents can be very expensive, especially if your vehicle is badly damaged or anyone is injured. The role of car insurance is to help cover bills and protect you from potentially devastating financial liability. Here is how auto insurance works.
Read Also: List of Insurance Companies in Kenya 2022
How Does Car Insurance Work
- An auto insurance policy consists of several types of coverage, some of which will be mandatory or optional, depending on where you live.
- Almost every state requires drivers to have some form of auto insurance and also to specify minimum amounts.
- The price of auto insurance varies according to the types and amounts of coverage, deductibles you choose, and other factors.
What does car insurance cover?
An auto insurance policy consists of several types of coverage, some of which are mandatory in most states, while others are optional. The most common coverages are:
- Bodily injury liability coverage. If you are involved in an accident that injured another driver or their passengers and you are at fault, this coverage will help pay for any costs associated with your policy limits. Required in 49 states and District of Columbia (The exception is New Hampshire, which allows drivers to forgo insurance but “strongly recommends” purchasing it. However, there are circumstances in which proof of insurance is required.)
- Property damage liability coverage. This covers any damage you cause to another driver’s vehicle or other property, such as a neighbor’s fence. It is also required in almost every country.
- Collision coverage. Collision insurance can cover damage to your vehicle in the event of an accident. It is optional in every country.
- Comprehensive coverage. Also known as “other than collision”, we have comprehensive coverage for damage to your vehicle from causes such as flooding, falling trees or fire. It also covers you in the event your car is stolen. Like collision coverage, it is optional.
- Medical Payments (MedPay) / Personal Injury Protection (PIP). Mandatory in some states, MedPay or PIP covers medical bills and related costs if you or a passenger in your vehicle is injured in an accident.
- Coverage for uninsured or uninsured drivers. If you ever have an accident with someone who doesn’t have car insurance or if their insurance isn’t enough to cover the damage they caused, that insurance can cover that shortfall. It is mandatory in some countries.
If you rent a car or have a pending auto loan, you can also consider a separate type of policy known as gap insurance. If you declare a complete loss of your car after an accident, gap insurance will cover any difference between what your auto insurance company pays you and what you still owe in your lease or loan.
Note that if you use your vehicle for business purposes, you may need a commercial vehicle insurance policy instead of personal insurance.
Who does car insurance cover?
Generally, a personal car insurance policy will cover the policy holder and any family members listed as drivers on the policy. The policies also usually cover anyone who is not on your policy but who drives your car with your consent.
How much does car insurance cost?
Under the AAA, the average annual premiums for comprehensive insurance (liability plus collision and comprehensive) are $1,296 to $1,403, depending on vehicle size, in 2021.4 However, your costs may be significantly higher or lower marked.
The cost of car insurance depends on a variety of factors, including the buyer’s driving history, place of residence, and the value of his vehicle. Prices can also vary from company to company for the same coverage.
The main variable is policy coverage levels. Countries that mandate certain types of coverage also set minimum amounts required for them. For example, a driver in Ohio must have at least $25,000 per person and $50,000 per accident in bodily injury liability coverage plus $25,000 in property damage liability coverage, which is often expressed as 25/ 50 / 25.
This is only the minimum; Drivers can, and often should, buy more coverage than that, especially if they have significant assets to protect from a lawsuit. For example, instead of 25/50/25, the driver may buy 100/300/100 or 250/500/100, which, of course, will cost more.
Still another factor in collision and comprehensive coverage is the withholding amount the policyholder chooses. This is the amount that the policyholder must pay out of pocket before his insurance begins, and the lower the deductible, the more expensive the insurance. For example, a policy with a $500 deductible will be more expensive than one with a $1,000 deductible.
Also you may Enjoy For:
How to file a car insurance claim
If you have an accident or your vehicle is damaged in some other way, you must notify your insurance company as soon as possible. You will designate a claims officer whose job it is to assess the damage and determine the amount the insurance company is obligated to pay you under your policy. (If you do not agree with the amount, you can object to it).
Ask your insurance company what information you need to process your claim. You can request, for example, that you send photos of your damaged vehicle via text message, email, or through the insurance company’s app. You should also keep any documents, such as a police report if available, and a receipt if you have to pay for the towing. If another driver is involved, you will need to provide their name and insurance information to your insurance company.
Your insurance company may have a list of approved repair shops they work with, although you can also choose your own.
When your vehicle is repaired, the insurance company may pay the shop directly or reimburse you if you pay. In either case, you will be responsible for covering the amounts deducted from your policy.
YOU MAY LIKE: