Owning a car is a great responsibility as it comes with insurance. Some people think that car insurance is a money-wasting hassle that gives you no benefits. But this is not true; in fact, car insurance offers financial protection and protects drivers and passengers from incurring huge financial losses due to car accident or vehicle damage. Here, we will discuss the importance of car insurance and what limits one should carry.
Importance of car insurance
It is mandatory
Liability car insurance is legally required in all states of the USA. It is the most common type of car insurance that covers the damage of the other party if their car damage is your mistake. If you are caught driving without liability car insurance, you could be suspended for a driving license, fines, or high payment, even you are subjected to arrest or sentenced to jail.
Car insurance helps you from bearing the financial burden
Unfortunately, if a car accident occurs due to your fault, you may have to bear the financial burden associated with it. For instance, it includes the medical expenses of the injured person, legal fee, and even their lost income if he leaves him unable to do work due to injuries. Your car insurance coverage gives you peace of mind and financial protection. In other cases, you need to pay all these costs out of your pocket.
Car insurance can help protect you from the cost of repairs
When you buy your own car, you want to have the car insurance covering the collision and comprehensive coverage and protect you from the repair costs. While the liability coverage helps you to pay the costs of the damage to the other party’s vehicle. So it is important that you should have the car insurance coverage for your own vehicle. For instance, if your car is damaged in a hailstorm, you need comprehensive coverage to pay the costs of repairs or replacements if your vehicle is damaged by falling an object or fire.
Car insurance helps you protect yourself.
As mentioned above, liability coverage is a legal requirement in all 50 states of America, but many motorists drive without it. If the Uninsured motorist hits you, then uninsured driver coverage may pay for your medical expenses. This type of coverage is required in some states of America and optional in other states.
What limits one should carry
In the USA, all the states set the minimum auto coverage limits in the law that motorists are required to purchase. A limit can be referred to as the maximum amount that the insurance company will pay for the claim. There are three limits in an auto policy for liability auto insurance.
Here’s how that breaks down:
- $ $25,000 of coverage for pay for injuries to a person
- $ $50,000 of coverage for injuries to everyone in an accident
- $ $25,000 of coverage for property damage you cause
It may vary from one state to the other. Check the requirement by state here.
When buying for auto insurance, you are likely to come across various types of auto insurance, each with its own advantages and limits. The following are the main types of car insurance:
Liability car insurance covers any financial damages to other parties when your vehicle is involved in an accident where you were at fault. There are two types of liability auto insurance; Bodily Injury and Property Damage. Bodily injury liability pays for any expenses that result from the injuries sustained in the accident, while property damage liability serves to compensate the other parties for damaged property. In most states, it is mandatory to have some form of liability coverage to ensure that drivers that cause accidents compensate the innocent party.
2. Collision Insurance
Collision coverage pays for all repair costs to your own car if you were at fault in an accident. You may be the best driver on earth, but there’s always a chance that it will be ruled you were partially responsible for an accident even if you didn’t cause it. In such a case, collision coverage comes in handy to pay for repairs to your car.
3. Comprehensive Insurance
This covers any losses from things other than accidents, such as vandalism, floods, riots, fire, hail, theft, and animal collision. However, it is important to note that comprehensive insurance only covers automobile damages but not the loss of personal items such as laptops if they are stolen from the vehicle.
4. Uninsured / Underinsured motorist insurance
There are still a lot of people driving around without any form of insurance coverage. Underinsured and Uninsured motorist coverage is meant to come into effect when you get into an accident with someone without insurance cover. Uninsured motorist coverage pays for injuries or damages sustained at the hands of uninsured drivers. Underinsured motorist coverage is used to fill the gap when the at-fault party’s insurance cover is insufficient to pay you for the damages.
5. Medical payments coverage
Accidents can result in terrible injuries, which may be very expensive to treat. Medical payments coverage helps pay for all medical costs related to the covered accident, regardless of who is responsible for the accident.
6. Personal injury protection insurance
This is similar to Medical costs coverage but covers a wider range. It can pay for medical and rehabilitation costs, work loss, funeral expenses, and replacement services. In most states, it is a requirement to have a minimum level of personal injury protection coverage.
7. Gap insurance
Since cars have some of the highest depreciation rates, sometimes an insurance settlement may not be enough to pay for the cost of a loan. Gap insurance helps drivers cover any amount owed on a vehicle loan after a theft or total loss.
8. Towing and labor insurance
This covers any expenses you incur for towing and other labor costs to repair your car after an accident.
9. Rental reimbursement insurance
After an accident, you may not be able to use your vehicle for days, weeks, or even months, depending on the time needed to repair it. This can be a terrible time, especially if you rely on your car daily. Rental reimbursement coverage pays for a rental car to use as you wait for your car to get fixed.
Car insurance coverage is more than fulfilling the legal requirement. It plays an important role in saving the lives of many people. It may help to protect your car, wallet, and offer peace of mind.