What Is Auto Insurance And Why Do You Need It?

Life is risky, and driving can be dangerous. The best way to mitigate or lessen the risk is with insurance. Car insurance protects you financially in the event you cause an accident. Car insurance is so important that state governments regulate and enforce it. Almost all 50 states require a minimum of liability coverage for anyone to drive a car legally. Insurance companies pool everyone’s money together and use it to payout claims. Not everyone will have an accident, so even though you are only paying $1,427 a year (the national average), there is plenty of money in the pool to cover many times that amount if you have a terrible accident. Causing an accident when you don’t have auto insurance will not only generate fees and other legal punishments but will leave you on the hook for paying for all the damages and injuries.

Common Types Of Auto Insurance Policies

While a minimum liability policy will allow you to drive legally, it’s probably not enough coverage for most people. Luckily, there are several types of policies that offer you much more protection. Liability Insurance: Each state will require a slightly different minimum amount of liability insurance you must carry. Liability coverage only pays claims for the party that you hit in an accident. It will have minimum amounts it will pay for medical and property damage. It will pay nothing towards your own injuries or vehicle repairs. Collision Coverage: If you want help paying for your own damage after an accident you cause, then you’ll need collision coverage. This policy will pay to fix or replace your car and extends to collisions with objects like trees or fences, and even accidents that don’t involve another object such as car-flipping. Comprehensive Coverage: Sometimes, damage to your car isn’t caused by an accident. Comprehensive coverage will help pay for repairs or replacement if your car is stolen, vandalized, or damaged by weather and falling objects. Full Coverage Auto Insurance: You might have heard the term “full coverage” when talking about auto insurance. This isn’t a specific policy; it’s industry shorthand for stating that a person has liability, collision, and comprehensive coverage. Full coverage is best for most people. If you’ve purchased your car using financing, the bank will require you to carry full-coverage auto insurance until the car is paid in full.