The insurance company covers costs of certain damages or injuries from car accidents or other covered events.
Covers car repairs, medical expenses, and liability for damages or injuries to others.
Legally required in most states to protect against financial impacts of accidents.
Important Car Insurance Terms
Premium: Regular payment for car insurance, can be monthly, quarterly, or annually.
Deductible: Out-of-pocket amount you pay before insurance coverage starts. E.g., with a $250 deductible on $1,000 damage, you pay $250, insurance covers $750.
Coverage Limit: Maximum amount insurance will pay for damages in an accident.
Claim: Request to insurance to cover damages after an accident.
Policy: Contract outlining coverage details including limits, deductibles, and premiums.
Types of Car Insurance Coverage
Liability Coverage:
Required by law in most states.
Covers costs if you injure someone or damage property in an accident.
Includes bodily injury and property damage liability.
Collision Coverage:
Pays for your car’s damages from a collision.
Useful for newer or high-value cars.
Comprehensive Coverage:
Protects against damages from non-collision events like theft or natural disasters.
Personal Injury Protection (PIP) or Medical Payments Coverage:
Covers medical expenses for you and passengers regardless of fault.
Required in some states.
Uninsured/Underinsured Motorist Coverage:
Protects against damages from drivers with insufficient insurance.
Optional Coverages:
Rental car reimbursement, roadside assistance, gap coverage.
Factors Affecting Car Insurance Premiums
Age and Gender:
Younger drivers often pay more.
Male drivers statistically involved in more accidents.
Driving History:
Past accidents or violations can increase premiums.
Type of Vehicle:
Expensive or high-theft-risk cars result in higher premiums.
Sports cars with high horsepower may also cost more.
Coverage Limits and Deductibles:
Higher limits or lower deductibles mean higher premiums.
Location:
High-risk areas for accidents or theft may increase premiums.
Credit History:
Lower credit scores can lead to higher premiums in some states.
Conclusion
Car insurance is crucial for financial protection against accidents.
Understanding insurance basics helps in making informed decisions about coverage to suit needs and budget.