As long as there are cars, the need for car insurance policies will sustain. Auto insurance is just as important as the steering wheels of a car. You can drive a car without both steering wheels and car insurance policies, but it is almost certain that you’ll end up in a disastrous accident.
For people who are just about to buy their car insurance policies, here’s everything you need to know. This article will present a comprehensive guide along with helpful hints about auto insurance; why you need to have these policies and what are the different types of policies you can buy. Let’s get started.
Why Auto Insurance is Needed
Here are some numbers that will shock you; there are around 290 million registered cars in the US, out of which more than 6 million passenger cars get in accidents every year.
This statistic is from 2019, and the number of road accidents has increased over the years.
Apart from road accidents being dangerous and traumatizing, they are also very expensive. A small fender bender can cost you hundreds of dollars. So to avoid paying these large sums of money from their pockets, people buy car insurance policies.
The auto insurance companies are then liable to pay for the repairs if your car gets in any accident. Different policies cover different accidents. So people buy auto insurance to transfer their liability for an accident to these insurance companies.
Insurance companies charge people money for this. Each policyholder must pay yearly premiums to keep their insurance policies active. The price of the policies and premiums is decided by considering multiple factors such as driving record, gender, location, age, etc.
Types and Their Uses
Now that we know about the requirement of auto insurance, let’s look at the different types of car insurance policies you can get and what they cover.
The most popular car insurance policy in the country and probably the whole world, liability insurance is a policy that you pay for, but it can only be claimed by the other driver involved in a car accident.
Let’s say that you get in a car accident and it was your fault. Since you are the reason for the accident, the damage and injuries caused to the other driver (property damage and bodily injury) are your responsibility as well.
You are liable to pay for the property repairs and medical treatments of the other driver. So to ensure that you have the money to pay for all the costs, the government requires you to carry liability insurance with a minimum coverage limit.
It is illegal to drive a vehicle without proper liability insurance in almost every state in the US. Liability insurance is also one of the most expensive car insurance policies you can get. It is so important that car dealerships won’t give you the car unless you have bought liability insurance.
Personal Injury Protection Plan
The personal Injury Protection plan is a very important auto insurance policy that is mandatory in 12 states, called the “no-fault” state. The “no-fault” comes from the fact that it does not matter whose fault the accident was, people are liable to carry out their injury protection plan.
A personal injury protection plan covers the cost of medical treatments needed after a car accident. It is very similar to MedPay, but the only difference is that Personal Injury Protection also pays for lost wages. Even if you do not live in the no-fault states, it is better to get a PiP plan.
Uninsured Motorist Coverage
Another important car insurance policy that’s also mandatory in 15 states. Uninsured Motorist coverage can be claimed when the driver at fault does not have liability coverage. Even though liability coverage is mandatory, there are still 32 million uninsured drivers.
Uninsured Motorist coverage can also be claimed if the driver at fault’s liability coverage is not sufficient to pay for the entire cost of the accident. Policyholders can claim their UM policy in a hit and run cases as well.
Collision Damage Waiver
A collision damage waiver is a very important optional car insurance policy that people buy to protect their car. If you get in an accident and your car is damaged, it does not matter whose fault the accident was, you can claim your collision coverage.
A collision damage waiver covers the cost of repairs needed for your car after the accident. Damages due to driving your car into a tree, pole, wall, or another car are all covered in this policy. It also covers damages due to bad road conditions.
A collision damage waiver is optional, meaning that you can either buy it or skip it depending on your needs. Why would you consider skipping this policy? Collision insurance is one of the most expensive car insurance policies you can get.
For people with cars older than 8 years, paying for a collision damage waiver and the premiums is not worth it. It is better to skip this policy and pay for the repairs from your pocket.
Another optional coverage that can be skipped is comprehensive. This insurance is also called parking insurance as it covers the cost of repairs for all the damages that may occur while the car is parked.
Damages due to natural disasters such as earthquakes, fires, floods, hurricanes, hailstorms, etc are all covered under this policy, along with animal damage, projectile damage, and damages due to vandalism and riots. This policy also covers theft.
In recent years, there has been an increase in the number of people driving their cars for Uber and Lyft. These people use their cars normally but then work for these rideshare companies part-time.
Since business use of cars is not permitted under general car insurance policies, Rideshare coverage is an option that lets drivers switch to business car insurance while driving for these companies. The cost of rideshare insurance is comparatively lesser than getting business insurance and it keeps their cars insured.
Here’s a comprehensive guide to everything you need to know about auto insurance, from the importance of insurance policies to the different types of policies and their uses.