How Does Car Insurance Work? A Drop-Dead Simple Guide
Whether it's your first time owning a car or you're buying a new one, car insurance is essential to have. Auto insurance helps you reduce your financial responsibility if you're at fault for damage caused by an accident. It's also great to have car insurance because you never know if someone who damages your car has enough money to cover your expenses.
But understanding how car insurance works and finding the right car insurance hasn't always been easy thanks to the wide selection of policies on the market and laws that differ from state to state. Luckily, all you need is a quick guide to help you make understanding and buying car insurance simple. Here's what you should know:
1. Know the Basics of Car Insurance
Car insurance or auto insurance is a policy you purchase to protect you from the financial implications of car accidents or other events that may occur from the damage of your car.
Car insurance is mandatory in most states in America, and it's there to provide a financial cushion should you face a lawsuit for an accident you cause. For instance, car insurance is helpful in reducing any expenses you may have to pay out of pocket if you damage property with your vehicle, such as running into your neighbor's car or a city fire hydrant. But there are other benefits of car insurance worth exploring, including:
- Repair your car. If a driver of another car hits the side of your vehicle but doesn't carry their own auto insurance, then you'll need to pay for it yourself if you want to fix it right away. Car insurance for an uninsured motorist helps cover this type of cost.
- Medical expenses. You can also get coverage for medical expenses to protect you and your passengers should you experience a medical condition caused by a car accident.
- Rental reimbursement. If you're without a car due to an accident that totaled your car, car insurance coverage with rental reimbursement makes renting a car convenient.
2. Understand How to Buy Car Insurance
Now that you know why car insurance is so important, it's critical to get the car insurance you need. Here are some key aspects to consider:
- Know how much car insurance you need. Get at least the amount of car insurance required by law. For instance, in the state of Florida, you must have personal injury protection (PIP) insurance of at least $10,000. However, New Hampshire drivers aren't required to have car insurance. But it's important to consider car insurance in states that do not have rules regarding minimum coverage because you may still be held financially responsible, such as in the state of New Hampshire. In practice, you may want much more than the minimum legally required policy to protect yourself.
- Choose your deductible. The deductible is the amount you pay out of pocket when you make a claim. A higher deductible typically lowers your monthly car insurance payment. But if you aren't sure you'll be able to come up with a $1,000 or $1,500 deductible, consider opting for the lower deductible.
- Consider liability coverage. Auto liability coverage includes liability coverage for bodily injury and property damage. These type of coverage ensures you have money to cover expenses for a lawyer to defend your case in a lawsuit, costs for property repair, or bodily harm as a result of an accident you cause. It's important to estimate how much liability coverage you'll need to reduce the amount you'll have to pay out of pocket.
- Don't forget roadside assistance. If your car breaks down in the middle of the road or you lock your keys in the car, you'll need to get help to tow or open your vehicle. Consider including roadside assistance in your auto insurance plan, especially if you're insuring an older vehicle that may break down.
- Consider collision and comprehensive coverage. If you run into a telephone pole or parked car, collision insurance is helpful for covering costs. Comprehensive insurance also is important if you're financing or leasing your vehicle since most lenders require the most coverage available.
- Use a policy aggregate. A policy aggregate helps you quickly choose the ideal auto insurance policy based on your needs. For instance, Online Auto Insurance helps you easily compare quotes from some of the top companies that offer car insurance policies to help you save time choosing your auto insurance policy.
3. Know How to Use Your Car Insurance
You have your car insurance policy paid for and now you really have to put it to use. But how do you go about it? The key aspect you should consider is that car insurance typically works after an accident or incident occurs. For example, you can't make a claim for a chipped windshield before it is actually chipped or damaged due to an accident.
The process for making claims typically involves reporting the accident to a police officer, exchanging insurance contact information with the drivers involved in the accident, and contacting your insurance if you are at fault. You'll have to pay a deductible to start the claim process. Deductibles are also required if you're making a claim for damage to your car by an uninsured motorist. Your insurance company assesses the damage, refers it for repair, or writes off the vehicle if it is totaled. You may receive compensation or reimbursement for vehicle or its repair, depending on the policy you chose.
Understanding car insurance doesn't have to be complicated. With this simple guide, you can master the basics of car insurance and make buying the right policy easy.