You may have many questions when it comes to auto insurance. Many parents worry about their teens driving and others worry about how their family will be protected if an auto accident were to occur. So what is auto insurance and what exactly does it cover? In the event of an accident, your auto insurance company will insure that you and your passengers are covered. In spite of this, you are the one to determine the level of coverage that works best for you and your family.
Types of auto insurance
Liability insurance, or third-party insurance, is generally the lowest form of auto insurance that an insurance company will offer you. This is the basic insurance you receive if you are ever involved in an accident and the accident has been proven to be your fault. With liability insurance, the auto insurance company will pay the damages to the other party.
With this plan, the coverage limits offered by the auto insurance company are usually set ahead of time. These restrictions are the maximum amounts the auto insurance company will pay if an auto accident occurs. For example, the insurance agent may choose to allow $15,000 coverage for each person (bodily injury). Or, $45,000 for bodily injury coverage and/or $15,000 for property damage (per accident).
Before an accident occurs, you must confirm with your auto insurance company what they will cover and what the monetary limits of coverage are. Sometimes you might be offered a very low insurance premium by an auto insurance company, only to realize that your coverage is minimal and unrealistic once an auto accident occurs.
Collision and Comprehensive coverage
In addition to liability, the auto insurance company will offer you a comprehensive insurance plan so you will be comprehensively covered in the event of an accident. In simple terms this means that if you are responsible for an auto accident, the insurance company will pay for the repair of your vehicle. But, this is not as simple as it sounds. The auto insurance company will always have the final say on what amount will be covered by them, so if it is cheaper to give you the market value for the car, then they will.
You might think that your car is worth $2,000, but the market value might only be $1,000.
This is a common scenario. So, if the repair of your car is more than $500 then the auto insurance company will simply pay you the book value for your car. You must make sure that the insurance company does not control the market value of your car. Normally, organizations like the AA will give an impartial market value. As with third party insurance, the auto insurance company will almost always reduce the amount that will be paid out as much as possible, so generally a comprehensive insurance plan will have the highest coverage limits.
Recreation Vehicles
Because a recreation vehicle is much different than a car, RVs require a separate insurance plan. It is common for RV owners to assume that their RV is insured comprehensively because their car is. Make sure you check with your insurance company for RV regulations.
More types of auto insurance
In the event of an auto collision, Medical (MedPay), Personal Injury protection (PIP) and no fault cover are the insurance plans that will cover you and your passenger's medical expenses.
Under no fault cover, the auto insurance company will pay the costs, no matter who is determined to be at fault for the accident. This ensures that your family and friends are covered no matter what.
PIP is often a minimum requirement for auto insurance in some states, but ask your auto insurance company what the minimum requirements are.
Uninsured/Underinsured motorists' coverage
This coverage is often a minimum requirement in some states and it will cover you in the event of an auto accident if the person at fault is underinsured or not insured at all. In the event of such a situation, you must ask your auto insurance company what you will be charged.
Rental reimbursement, towing and labor
These are extra options, often given with a comprehensive insurance plan, and they are available as specials for auto insurance. If your car is damaged the auto insurance company will pay for most rental costs. Also, the auto insurance company might offer to pay for the tow of your vehicle, but it is not always included.
The legal requirements
Most states require a minimum level of coverage-ranging from full comprehensive car insurance to third-party auto insurance. In most cases it is up to you, the driver, to ensure that your auto insurance company offers you the minimum requirements for coverage. In most cases the auto insurance company is not responsible for instructing you of the minimum requirements.
But of course, a reliable auto insurance company will try their very best to advise you so you receive the best auto insurance deal possible.
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