Most states require some form of automobile insurance before you can even get behind the wheel of your vehicle. In general, it gives limited financial protection in the event of an accident. But when asked, many people don’t know or understand the details of their policy. We’re here to help you understand the ins and outs of your auto insurance plan so you’re able to make educated decisions about your coverage.
Car Insurance Basics
Insurance is essentially a contract between the insurance company and insured person. It protects the insured against some or all financial loss should there be an accident or theft. The insured pays a premium either monthly, every three or six months, or annually. In return the insurance company agrees to pay for damages or losses as detailed in your auto insurance policy.
Some of the things that automobile insurance covers include:
Liability – the insured’s legal responsibility to others for any bodily injury or property damage
Property – theft or damage to the vehicle of the insured
Medical – costs for medical related expenses such as treating injuries or rehabilitation
Depending on the policy, medical may also cover lost wages and/or funeral expenses.
Since automobile insurance is priced individually based on your desired coverage, you’re often able to find a level of insurance to meet your needs and maybe even your budget. Many companies will also negotiate payment plans throughout the coverage period or allow you to make one bulk payment. It’s also common to get additional discounts when insuring multiple vehicles or when combining your auto insurance with other policies such as homeowners or renters insurance.
Automobile Insurance Coverage
A typical vehicle policy covers you as well as other family members included on your policy. This coverage not only includes your vehicles but also if you’re driving someone else’s vehicle (with permission). It’s likely your policy also covers someone else driving your vehicle with your consent. However, it’s important to speak to your insurance agent to fully understand who falls under your coverage and under what circumstances.
It is important to understand, however, that a personal auto policy only covers personal driving. This includes commuting to your job, running errands, or personal trips. If you use your vehicle for commercial purposes, such as pizza delivery or taxi service they you may need additional coverage. Many insurance companies have started offering supplemental insurance coverage for those who use their vehicle for ride-sharing businesses such as Lyft or Uber. However, there’s almost always an additional cost for this extended coverage.
Is Vehicle Insurance Mandatory?
While insurance requirements vary greatly from state to state, insurance may still be required if you’re financing a vehicle. This ensures their investment is protected.
Almost every state requires some level of car insurance. Most often, they want the following coverages:
Property Damage Liability – reimburses other drivers for damages that you or someone else operating your vehicle causes to another person’s vehicle or other property
Bodily Injury Liability – reimburses for costs associated with any injuries or death caused by you or another person driving your vehicle
Medical Payments or Personal Injury Protection (PIP) – reimburses for medical expenses for any injuries sustained by you or your passengers
Uninsured Motorist Coverage – reimburses you when you’re in an accident caused by an uninsured driver or if you’re involved in a hit and run
In addition to uninsured motorist coverage you also have the option to purchase under insured motorist coverage. This covers the expenses occurred when another driver lacks the proper coverage to cover all the costs of a serious accident.
In many states, PIP and uninsured/underinsured motorist coverage are optional. However, adding them to your plan will provide you with greater financial protection.
The most basic auto insurance covers the damage caused by your vehicle but not any damage you incur to your own vehicle.
Optional Coverage
Cars and trucks are expensive and, quite often, our lives revolve around their use. Many people find that the minimum level of coverage isn’t enough to protect them if they sustain damage to their vehicle from various causes. Thankfully, you have the option to purchase additional coverage based on your wants and needs.
Comprehensive – reimburses for theft or damaged caused by incidents that aren’t collisions with other vehicles or objects such as:
- Falling rocks or trees
- Fire
- Flood
- Hail
- Vandalism
Collision – reimburses for damage to your vehicle sustained when you are at fault for a collision with another object such as:
- Animals
- Cars or trucks
- Guardrail
- Potholes
- Rolling your vehicle
- Trees
Glass Coverage – Reimburses or provides coverage for windshield damage or glass repairs including:
- Glass sunroofs
- Rear windows
- Side windows
- Windshields
Depending on your policy, glass coverage may have no deductible or there may be a small deductible.
Gap Insurance
If you’ve ever purchased a new car you probably understand how quickly they depreciate. If you haven’t, well let’s just say your car loses value the moment you drive it off the dealership’s lot. The problem with the quick depreciation is that both comprehensive and collision coverage only cover the market value of your vehicle. It doesn’t take much to create a gap in what you paid for your vehicle and fair market value. So if your car is stolen or totaled in an accident you might find that your insurance coverage leaves a gap between what it covers and what you owe on the vehicle.
This is why gap insurance exists. It helps cover the gap so you don’t end up making payments on a vehicle you can no longer drive or no longer have in your possession. If you’re purchasing or leasing a new car then you’ll likely need gap insurance to fully protect yourself.
Finding the Right Auto Insurance for You
Now that you know the basics, it’s a good idea to reach out to your car insurance provider and make sure you have the right coverage for your needs. It’s also a good idea to shop around to ensure you’re getting the best rates for your situation.
If you’re not sure where to start or if you’re looking for a quote, reach out to Complete Financial Group. Our experienced staff knows the ins and outs of automobile insurance and want to help you get the coverage you need.
