Basics of Auto Insurance and Coverage

Auto Insurance Basics

car insurance basics

Auto Insurance covers cars, trucks, buses, taxis, motorcycles, and anything else that requires a driver’s license to operate. Auto Insurance pays the owner of the vehicle in case of theft and to cover the cost of medical treatment or damages to the car. Insurance policies for autos are broken down into 3 types of coverage: bodily injury, liability, and property damage. This is why you are given 3 figures when requesting for an Auto Insurance quote. Go here if you are in the market to compare.

For example, in Wyoming, the auto insurance is based on the minimum state requirements of 25/50/20 or 25,000/50,000/20,000. The first two numbers represent bodily injury and liability limits while the third figure is the amount for property damage.

All autos that are not fully paid are required by the lenders to get full to almost full (or comprehensive) coverage. As the loan is paid gradually, the lender can agree to lower the requirement on Auto Insurance. For autos that are loan free, the amount of insurance will depend on the legal minimum and personal preference of the owner.

For instance if the minimum state requirement is 25/50/20 a car owner can choose this coverage or get something more comprehensive. He just cannot go any lower than what the state requires.

Auto Insurance Basics

Every Auto Insurance policy is a legal and binding contract between the vehicle owner and the insurance company. The insurance company agrees to pay for damages and other expenses related to a road accident or property damage caused by the vehicle. The vehicle owner promises to pay an agreed monthly premium to cover part of the claim. Furthermore, the vehicle owner will have to shoulder a “deductible” when filing an insurance claim.

Both parties will have to agree on the coverage. Ideally, the vehicle owner should get maximum coverage but this is rarely the case because it becomes too expensive to maintain. Thus, a vehicle owner should prioritize certain factors when customizing his insurance policy plan.

For instance, if the vehicle owner takes frequent road trips, he might want to increase coverage to include towing and road assistance. If you own an expensive automobile, you might want to increase the insurance on collision coverage because repairs on high end luxury cars are usually more expensive.

The Basic Types of Coverage are:

Bodily Injury Liability – This pays for injuries to the driver and any passengers of the other vehicle if you are responsible for the accident. This money will help you in case you are sued by the injured party/parties.

Medical Coverage – This covers you, as the car owner, your passengers and even the people who live with and use the insured car in case of an accident. It also includes insurance for the car owner if he is a victim of a vehicular accident and he is a pedestrian.

Property Damage – This is similar to Bodily Injury but applies to property like the other party’s car

PIP or Personal Injury Protection – On top of the medical coverage, PIP can be applied in no-fault cases. It can include funeral expenses, hospitalization, treatment, income loss, and other related expenses.

Uninsured or Underinsured – This covers Bodily Injuries and damages to you or your passengers if you are victims of a road accident and the other party has no (or not enough) insurance.

Insurance Basics Overview

What are Insurance Basics?  Premium – Deductibles – Copay

Basics of Insurance

Insurance has always been about protecting your interests and possessions against calamities, accidents, risks, or unforeseen events. By paying a monthly premium, you are storing funds with an insurance company to cover your financial needs in time of stress or a change in your normal routine.

There are different kinds of insurance and over the years insurance has become so specialized that it is possible to insure parts of the body, specific situations like flooding or weddings that did not push through, and even strange coverage like alien abduction and zombie attacks. Fortunately, most people stick to the mainstream insurance plans like Auto, Life, Medical, and Home insurance.

For all insurance types, there are similar basics such as:

Premium – This is the amount you pay every month to cover your insurance. There are some businesses that pay for part of the premium for their employees like health insurance.

Deductible – This is the amount you have to pay the insurance company after a claim has been approved for payment. For instance, your car is involved in an accident and would cost $500 to repair. You can file an insurance claim but will have to pay the agreed deductible written on the insurance policy before the insurance company pays for the repairs.

Copay – This is a flat rate that you are required to pay when you avail of coverage

Maximum – This is the final amount that an insurance company will pay. It is usually applied with a recurring expense like a medical condition

In almost all cases, insurance for auto is mandated by law. You can’t drive a car that isn’t insured. With the new Health Insurance Law in the United States which takes effect in 2014, Health Insurance will also be a requirement or a penalty tax will be levied on the non-paying individual. Related information here..

In most cases, a person is free to determine the amount of insurance he or she wants to purchase provided there are no loans or mortgages attached to the vehicle or property.