The Importance of Auto Insurance

The Importance of Auto Insurance

The Importance of Auto Insurance

Depending on the policy you choose, car insurance can provide financial protection in the event your car is damaged or stolen, you’re injured in an accident, or you’re at fault for an accident that causes bodily injury or property damage to third parties. It can also help you meet any minimum coverage requirements mandated by your state or required by a lender.

How car insurance works specifically can depend on the laws of your state, which coverages you carry, and your insurer. Car insurance can act as a type of property and casualty (P&C) insurance that provides financial protection if you’re in a car accident, your vehicle is damaged in a non-collision event (e.g, a falling tree, hail, etc.), or your car is stolen. In exchange for a premium – the amount of money you pay for your policy – the insurer will pay for covered expenses up to any applicable limits.

Auto insurance acts on the concept of indemnity, which states the policyholder will be made whole again or returned to their original financial position. If your car suffers damage or you are sued over an accident you caused, your insurance policy can step in and help pay for repairs, replacements, medical bills, and any other expenses you are deemed liable for – assuming you have the proper coverage and limits to do so.

Some form of car insurance is mandatory in most states, and the legal requirements and minimum limits vary by state.

Most require coverage for third-party bodily injury and property damage liability claims in the event you are at-fault in an accident and injure another driver or their passengers or cause damage to someone’s property, such as a fence or mailbox. Medical coverage for you and your passengers may also be required in the form of personal injury protection (PIP) or medical payments (MedPay) coverage.

Physical damage coverages, like comprehensive and collision, are typically optional but may be required if you finance or lease your car. These coverages provide first-party property protection for your own vehicle if it’s damaged and you’re responsible for paying the repair or replacement costs.

Every policy is based on limits, or the maximum amount the insurance company will pay on a claim. Some types of coverage also carry deductibles, or the amount you have to pay before the insurer will cover remaining costs.

There are several types of car insurance available, and you can customize a policy to get the insurance coverage you need. Let Auto Policy Bind help you understand the process and point you in the right direction.