Drivers need to be in possession of certain documentation in order to own and operate a motor vehicle legally. Naturally a driver’s licence is necessary, as is a vehicle registration. However, drivers also need proof of automotive insurance to be able to operate their cars and trucks. Auto insurance helps protect a person’s finances by covering the cost of bills resulting from accidents or other incidents involving vehicles. Navigating the basics of auto insurance can be a little tricky, but consumers can use this guide to gain a greater understanding of their policies and coverage.
What is automotive insurance?
Investopedia defines automotive insurance as a policy between a consumer and an insurance company that says the person will make payments, and in return, the insurance company agrees to cover the costs of medical bills, vehicle repairs and other property damage. Some types of automotive insurance are required by law, while others are optional.
Liability coverage
Most states and provinces require drivers to have liability insurance. This is the most basic coverage to legally drive a car. The Insurance Information Institute says liability insurance pays the other driver’s medical, car repair and additional costs when the policyholder is at fault in an auto accident. Bodily injury liability, which applies to injuries that the policyholder and family members listed on the policy cause to someone else, is included in liability insurance. Policyholders can purchase more than the minimum required. Property damage liability pays for damage a driver may cause to someone else’s property, such as vehicles, lamp posts, fences, buildings, or structures.
Collision coverage
Collision coverage pays for damage from a collision with another car, an object or a pothole, or from flipping over, says the National Association of Insurance Commissioners.
Comprehensive coverage This coverage will reimburse a policyholder for damage to the vehicle that’s not caused by a collision. This can include weather, fire, flooding, and hitting an animal.
Personal injury protection (PIP)
The III indicates this coverage pays for the treatment of injuries to the driver and passengers. PIP can cover medical payments, lost wages, and the cost of replacing services normally performed by the person who was injured in the auto accident. PIP may cover funeral costs in some cases.
Uninsured and underinsured motorist coverage This coverage offers protection to policyholders who get in an accident with a driver who doesn’t have insurance or has insufficient coverage to fully cover the costs of the accident, says Investopedia.
Premiums and deductibles
A premium is the total amount paid for the policy. It is determined by the coverages, policy holder’s age and driving history, and a number of other factors.
Insurance policies typically have deductibles associated with them. This is the amount a policyholder has to pay out of pocket before the insurance kicks in and pays out. A higher deductible often means a lower premium.
Insurance policy terms typically are six months in length and will auto-renew at the end of the term. Motorists can keep an eye out for policy changes and costs at this time and decide if they want to stick with their insurance company or shop around.
Automotive insurance is needed to operate a vehicle, but costs will vary depending on the coverage.
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