Car insurance helps you manage the financial risks of owning and driving a car. Chances are, you wo n’t be involved in a car barge in this year, but if you are, your insurance policy can pay for the damage — and you wo n’t be stuck with a sudden charge for thousands of dollars .
Most of the premium you pay your indemnity company goes towards covering other people ‘s claims, with a smaller assign of it covering your insurance company ‘s engage costs. This includes the price of adjusting and paying claims, and setting premiums by assessing how probably its customers are to get in a crash or file a claim .
There are four chief types of car insurance coverage : liability protection, collision coverage, comprehensive coverage and personal injury protection. Each of these pays out in a unlike scenario, and you can choose to include some or all of these in your indemnity policy. At least one of these types is required in decree to drive a car in about every state of matter.
Reading: How Does Car Insurance Work?
What is car insurance?
Auto policy covers the cost of damages when a car accident occurs. These types of damage admit :
- Bodily injury to yourself or others.
- Physical damage to your car or another car.
- Damage to your property or someone else’s property, like a cell phone or fence.
No matter how safe and skilled a driver you are, you can not control factors like the weather, the state of the roads or the actions of early people. By buying an car insurance policy, you ‘re paying the insurance company so that, if an accident occur, you are financially protected and don’t have to pay an overwhelming amount of money towards repairs .
What does car insurance pay for?
All car insurance exists to protect you in case of an unexpected accident. however, different kinds of car insurance blanket different kinds of accident scenarios. These types of car policy, among others, include :
- Bodily injury and property damage liability insurance
- Comprehensive and collision coverage
- Personal injury protection (PIP) and medical payments coverage (MedPay)
- Uninsured/underinsured motorist coverage
here ’ s how these different kinds of car policy work :
Liability auto insurance
As its mention implies, liability car indemnity covers the other person ‘s damages when you are liable, or at blame, in a car accident. Most states mandate liability coverage, and states that do n’t require liability coverage require you to prove that you are financially responsible for any damages .
Liability car indemnity policies combine two different types of coverage :
- Bodily injury (BI)
- Property damage (PD)
Bodily injury liability indemnity covers any costs that arise from bodily injury to the other party, ranging from funeral costs or lost wages to medical and dental bills. Property damage liability policy covers the costs of repairs to or successor of the early party ‘s property damaged in an accident, whether that is their car, base or some other object .
When you call an insurance company to ask about liability policy, the agent will by and large quote you three numbers in a quarrel, such as 25/50/10 or 15/30/10. Called “ cleave limits ”, these numbers represent the maximum sum your insurance company will pay to cover :
- Bodily damages to one person.
- Bodily damages to all people involved in the accident.
- All property damage caused to others in an accident.
Each state sets minimal requirements for indebtedness damages. If you drive without policy that meets these minimum limits, you could be subjugate to fines or even jail clock .
If, on the other hand, you are at fault in an accident and the damages go above these minimums, you are responsible for paying the remainder. If the other driver sues you, you could forfeit all your assets to pay for the damages .
Given this risk, experts recommend that you purchase the maximal come of indebtedness coverage you can afford, ideally enough to cover your total net worth or more .
Comprehensive and collision car insurance
liability indemnity alone covers wrong you do to person else ‘s person or property. It does not cover any price caused to your own property .
physical price car policy, by line, covers the monetary value of damage to your car. If you want to avoid paying for the full cost of repairs if you are at fault in an accident, you should purchase this kind of insurance .
There are two kinds of physical wrong cable car insurance :
- Collision coverage: pays for damage to your car if you are at fault in an accident. If it’s unclear who is at fault, collision coverage will still pay for your repairs.
- Comprehensive coverage: covers damage to your car that does not occur during a collision. This damage could result from theft, vandalism or natural disasters. Despite what its name indicates, however, comprehensive car insurance does not cover everything. Personal items stolen out of your car, for instance, are not covered.
While collision and comprehensive coverage are both optional, we recommend purchasing them both. If you do n’t have this coverage, you will be creditworthy for the full cost of repairs to your cable car after an accident. If you do, you will alone need to pay your deductible, and insurance will pay the rest .
Personal injury protection and MedPay
personal injury protection ( PIP ), besides known as “ no-fault policy ”, pays medical bills for you and your passengers after an accident. It is frequently called no-fault policy because your insurance company pays careless of who is at fault in an accident .
Some PIP policy covers lost wages, family and child care expenses, and funeral costs. States vary as to whether they require PIP, but because checkup bills can promptly become crushingly expensive, it is a good idea to purchase it if you can .
Another option that many consumers choose is MedPay. Though comparable to PIP, MedPay only covers aesculapian and funeral costs and broadly does not cover lost wages, psychiatric care or rehabilitative concern, as PIP does .
Uninsured/underinsured motorist coverage
If the other driver is at defect in an accident, their indebtedness insurance should cover your repairs. “ Should ” is the crucial bible here, however. One in every eight drivers on the road is uninsured, which means there is a significant prospect that you could get into an accident with a driver who lacks the policy needed to cover your damages .
- Uninsured motorist coverage pays any personal or property damages from an uninsured driver.
- Underinsured motorist coverage pays any additional personal or property damage costs when the other driver’s insurance is insufficient to cover those damages.
Because there are then many uninsured and underinsured drivers on the road, some states require drivers to carry this kind of coverage as part of the minimum indemnity requirements .
rental car coverage helps pay for a rental car or sometimes understudy transportation while your car ‘s being repaired after a claim. But you ‘ll typically need both collision and comprehensive examination coverage before you can add this coverage to your policy.
Read more: The Best Car Insurance Companies for 2022
If another driver causes a crash, their indebtedness insurance should help cover the monetary value for you to rent a similar car while yours is in the workshop. Your own policy would cover a rental car if you have lease car reimbursement and you ‘re at blame for a collision .
rental car reimbursement besides covers you for a comprehensive examination claim that puts your car out of commision, such as if you hit a pole or a tree limb falls on your cable car .
Gap policy covers a scenario in which you have a cable car lend or lease and the car is totaled in an accident or stolen .
Comprehensive and collision coverage will only pay the car ‘s actual cash value, and because cars depreciate in prize so promptly, there is much a gap between the car ‘s cash value and how a lot you owe on your car loan .
Gap policy covers that sum, paying the dispute in the consequence that you can nobelium longer use your car because of larceny or damages. It is an optional character of coverage you can add to your existing policy .
Roadside assistance coverage
always been stuck on the side of the road with a flat ? Roadside aid coverage helps you get out of this common situation .
Paying for roadside assistance coverage on your auto insurance policy means you’ll get professional help when you run into common car problems, such as needing to have your battery jumpstart, your car towed or your flat changed. Like gap policy, roadside aid is an extra type of coverage you can add to your existing policy .
How paying for auto insurance policies works
The payment structure for car insurance can be confusing. The follow explains the versatile pieces of an car indemnity policy and who pays for each :
- Premium: the amount of money you pay the insurance company for the coverage it provides. Payments are usually made once a month or every six months.
- Deductible: comprehensive and collision car insurance include a number known as a deductible. The deductible is the amount of money you must pay after every incident before your insurance company begins to cover costs. As a general rule, a higher premium gives you a lower deductible and a lower deductible results in a higher premium.
- Limit: how much money the insurance company will spend on an accident after you have paid your premium and, when applicable, your deductible.
Insurers take different approaches to calculating premium costs, but a few things remain coherent from insurance company to insurance company :
- Personal details: Age, gender and location all factor into how much you pay in premiums.
- Credit and driving history: If you’ve proven yourself responsible behind the wheel and with your money, your premium will likely be lower.
- Car type: Want a fast, new and expensive car? It’ll cost you to insure it. Insurance companies typically charge higher premiums for cars that are more costly to repair.
- Which coverages you include: Want to add roadside assistance or gap insurance? You’ll pay more for these added coverages.
- Discounts: Are you a student with good grades? Have you served in the military? Are you willing to pay the full cost of a six-month policy up front? These are just a few reasons insurers may be willing to offer you a discount.
- Number of people covered on the policy: Do you have a family of four? A house of six roommates? The more drivers added to your policy, the more risk that one of them will get in a crash. Your premium will likely increase to reflect that risk.
How car insurance works after an accident
You ‘ve done your inquiry, compared the best quotes and purchased a policy. You hope that you never have to use it, but finally an accident happen and you do .
How does car insurance work in the practical here and now when your car sustains damage ? Keep read for a brief overview of how car indemnity claims work and what to do if you get into an accident .
Collect all relevant evidence and documentation
Did you get into an accident ? here ‘s what you should do :
- Pull off the road to a safe place.
- Call the police.
- Collect as many details about the accident as you can.
- Photograph the damage.
- Write a brief summary of the accident on your phone.
- Take down information about the other driver’s car and insurance information.
- Be sure to get the name of their insurance company and their policy number.
Avoid making any statements that imply you accept mistake, and do not let the early driver know how much coverage you have. If you have better coverage than the other driver, they may take advantage of that fact and blame you for the accident so they do not have to pay for damages. Silence — except for exchanging information — is generally the best set about, unless you have good reason to believe the early driver ‘s life is in danger .
Reach out to your insurance company
Having assembled all the relevant information, it ‘s clock time to let your insurance company do what you ‘re paying it to do. here are the steps you should take :
Call your insurance company to open a case. Give your insurance company as much contingent as potential to speed up the claims process .
File the report quickly. It ‘s significant to submit your claim before the insurance company ‘s claim filing deadline and the state ‘s codified of limitations deadline .
once the initial address is complete, your insurance company will hand your claim over to a claims adjuster or claims specialist. This person is your go-to for all questions regarding repairs, medical expenses and other aspects of your coverage .
The claims adjuster will assess the damage, determine how much compensation you are owed and sometimes steer you to a specific patronize or party for repairs. The money they offer you is known as a colonization offer. many states have laws requiring companies to make this crack within a certain come of prison term after you file the initial claim .
If you feel that the settlement offer is insufficient, you can negotiate it. Be prepared to make your character equally robustly as possible, and come prepared to back up your position. You may need to take legal action if the counter-offer the party makes is insufficient .
Remember besides that the ship’s company is not obligated to pay you more than the maximum sum of coverage on your policy. You are responsible for any extra expenses after your coverage maxes out.
If you believe the early driver or drivers are at demerit for the accident, reach out to their indemnity company to explain the position. You may be entitled to have your repairs paid for by their liability coverage .
Certain states, however, are no-fault states and mandate that all drivers have personal injury protection. If you live in one of these states, then there is no need to file a call with the other driver ‘s policy company. You would file a claim with your own insurance company .
No matchless likes being in a car accident, and the complexities of car indemnity across different states and companies do n’t make it any easier. Armed with a solid cognition of how car insurance works, however, you can successfully select the coverage that suits your particular needs and engage your insurance company when an accident happens .