Auto Insurance 101

Whether you are an experienced driver or you finished purchasing your first car, you need car insurance. The most basic purpose of auto insurance is protecting you and your vehicle if there is an accident. This includes paying for repairs to fix your car, medical expenses if you were hurt in the accident and even covering legal expenses.

Auto insurance is an important tool, but it can also be confusing because there are many different types of coverage available. Listed below is a basic overview of auto insurance, including what exactly is covered and how your rates are determined.

Purchasing Auto Insurance

Auto insurance is divided into separate plans, also known as policies. Your policy determines what level of coverage you receive. Each policy comes with a different premium, which is the amount you pay every month for coverage. The more coverage available, the higher your premium. Typically, premiums are paid each month, but some insurance providers may offer a discount if you pay your annual policy upfront.

In addition to a premium, each policy comes with a deductible. The deductible refers to the amount you must pay out of pocket before your insurance coverage begins. For example, if you have a deductible of $1,000 and are involved in a $10,000 accident, your insurance pays the remaining $9,000 after your deductible.

Several factors determine your insurance cost. One consideration is the vehicle you drive. Having safety features, such as anti-lock brakes or advanced security lower your costs. Your driving record is another consideration. This primarily includes whether you were involved in a past accident, but driver safety classes are also considered.

Types of Policies

The most common coverage available on all policies is auto liability coverage. This provides coverage if you are at fault for an accident. This covers both your vehicle as well as any other vehicles or property involved in the accident.

Medical costs are typically included in most plans, but legal costs may require an additional policy. The other common insurance option is collision, which covers any damage to your vehicle in an accident.

Comprehensive coverage protects you against events beyond your control, such as weather damage or theft. If you get uninsured coverage, you do not have to pay any out-of-pocket expenses if you are involved in an accident with an uninsured motorist.

Medical or personal injury protection cover medical expenses for both you and any other passengers in your vehicle, whether or not you were at fault for the accident.

There are additional types of specialty policies available. These typically cover niche conditions, such as glass damage, rideshare coverage or rental car reimbursement.