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Understand How Auto Insurance Works

Understand how auto insurance works and get more value out of your policy. For most of us, when we buy a car we also purchase a new insurance policy to go along with it, not stopping very long to really think about it. As consumers of automobiles we usually put a lot of time into the decision of what to buy and what our budget might be. But these thoughts sometimes don't enter our minds at all when it comes to the insurance end of things. In many cases we just take for granted that the auto insurance we have is sufficient and that the agent we work with knows what is best for us. But it is much better and safer if we know, too. It is a good idea to take the time needed to learn more about how auto insurance works so that you can have a better understanding of your own policy and what it does for you as a covered driver.

Types of Auto Insurance Coverage

Coming to an understanding of car insurance really ought to begin with a close look at the different areas of coverage included in your own policy and what each of those areas are responsible for taking care of on your behalf. All auto insurance plans include liability coverage, and most states require auto insurance. This protection is required virtually everywhere in the country and is the foundation of auto insurance protection. It covers the cost of injuries and property losses to others that come about as a result of an accident that you cause. Liability policies are sometimes split into separate areas for bodily injury and property damage.

Collision insurance pays for the cost of damage to the covered vehicle as a result of collision circumstances. Comprehensive handles non collision losses to the vehicle, such as theft, fire, hail, and accidents involving deer. Limits of coverage are generally the same for collision and comprehensive. They are listed out as whole dollar figures, but in many ways are essentially limited to the market value of the covered car. Collision and comprehensive policies come with deductibles, as does liability. In fact, split limit liability plans have three deductibles and three separate limits of coverage, while single limit plans are not split like this. Again, this speaks to the need to know and understand your own policy and to be aware of the coverage you have and don't have.

Auto Insurance and Auto Registration

No matter where you live, you probably have to have current car insurance in order to register your vehicle or to renew your registration. Most people are aware of the fact that registration is required and that the only way to get registered is to be insured. But many do not really know why registration is important or even why insurance is such a significant investment aside from the legal aspect of compliance with the various state laws. Those of us who have had to make a claim on our policies have no trouble speaking to this importance, however. Anyone who has ever had to endure significant medical expenses or benefited from having those expenses picked up by auto insurance understands the importance of insurance. It is interesting that experience either way helps us to understand.

Required Auto Insurance

As mentioned previously, car insurance is required almost everywhere around the country - you can even look on the internet to find the cheapest online car insurance. Some areas of coverage are mandatory while others are optional. There are also special cases where coverage options become mandatory not because of state standards, but rather due to lender requirements. This is the case with collision and comprehensive policies, considered optional by the state but required by lien holders in cases where autos are finances or leased.

Insurance companies when they set rates for us as drivers want to know a lot of information about us. They ask many questions about our daily lives, ranging from how we use the car and what we use it for to where we park it at night and how many miles we put on it each year. The different questions we have to go through are all part of the insurers' efforts to understand us for our habits and to effectively gauge the risk of carrying us as covered motorists on a policy.

In the end, auto insurance is really all about risk. In taking us on as customers, car insurance companies are choosing to take on at least a portion of the risk of our getting behind the wheel in our stead. Some of the dangers and potential pitfalls we might face as drivers are protected by a good car insurance policy. Auto insurance is an important commodity for all motorists and auto owners. It is important to understand how auto insurance works to get the most from it.


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