Auto Insurance – What Is the Coverage and Cost?

When you have to pay for damages that you have caused to someone else while driving, getting auto insurance policy helps. What if your car gets hit for no fault of yours? If you have auto insurance, you can rest in peace.

Auto insurance means a mutual understanding with your insurance company to pay for financial losses that may occur due to an accident. Initially you pay the premiums and the insurance company will then pay for any financial loss that results and is in accordance with their policy clauses.

How are you covered by your auto insurance?

Usually you will be given property, medical and liability coverage. All states require you to have some of the coverages.

Auto insurance includes 6 different kinds of coverage:

  • PIP or Personal Injury Protection covers treatment costs for injured drivers and passengers of the policy holder’s car.
  • Bodily Injury Liability covers the damage that a driver/policy holder causes to someone else. The driver may be you or even your family members as mentioned in the policy.
  • Collision is usually sold with deductibles between $250 and $1000. It pays for the damage incurred on your car due to collision with another car/object or if the car flips over.
  • Property Damage Liability is functional when you or anyone who drives your car with your permission causes damage to another person’s property. The property may be a car, lamp posts, fences and any other structure that you hit.
  • Uninsured Coverage pays for any damage you face due to being hit by an uninsured driver. Under insured Coverage pays for the damage caused to you by a driver with insufficient insurance.
  • Comprehensive coverage pays for any loss occurring due to theft, fire, falling objects, missiles, explosions or for damage that occurs not from a collision.

Do you really need auto insurance?

Yes! If you want to protect your assets and want to be saved from the unnecessary hassle of parting with a lump sum amount at once you need auto insurance. Besides, almost all states need you to have at least the minimum amount of insurance.

How can you choose an insurance company?

Check out the 5 most important things when choosing an auto insurance company:

  1. Check if the company is licensed to provide auto insurance.
  2. Carefully consider what the company is offering you for the price they are charging.
  3. Find out if the company providing insurance is financially sound. Only a financially sound company can provide you peace of mind when you claim your insurance.
  4. See if the insurance company has a good service record. You may even refer to client/customer testimonials.
  5. Make sure you feel comfortable with the company or the agent providing insurance. If you are not comfortable, then the company is not the right one for you.

How much should you pay for your insurance policy?

Although the insurance quotes vary between companies and also states, there are several factors that determine how much you will pay for auto insurance.

  • Driving record – If your record is good your premiums will be low and vice-versa.
  • Number of miles driven per year – The lower the number lesser the premium. Accidents have more chances to occur if you drive more miles.
  • Location – The trend of accidents, probability of thefts, lawsuits, cost of medical treatment and car repair in your locality also determine the premium that you need to pay.
  • Your age – Teenagers are charged more than mature drivers with more driving experiences.
  • Your car – Cost of your car, cost of repairs, likelihood of theft, safety record of your car also determine how much you will pay.
  • The coverage amount – Bigger coverages require you to pay more premiums and also offer discounts at times.

What not to do when buying auto insurance?

Take a look at the 3 common mistakes to avoid when buying insurance.

  1. Buying insurance that fits the state minimum requirements: It is always advisable to consider the factors that determine the cost of your auto insurance.
  2. Considering cost alone when buying insurance: You may opt for a company that demands lower premiums. But check if the money reimbursed will cover the damage that may be incurred.
  3. Not being transparent about driving history: You may not get an accurate quote if you have not clearly and honestly mentioned your driving history. If this happens, then at a later date your policy might also get cancelled.

Getting auto insurance is the best thing to do to protect yourself from any financial loss that may occur as a result of some automobile accident. It is all a part of smart planning. Accidents are something we can’t predict. The best thing to do would be to keep yourself prepared for any damage that may occur in future.


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