The costs associated with car ownership are often more expensive than the cost of buying a car. Car owners must pay to maintain their vehicles, fill them with fuel and pay for auto insurance. Auto insurance protects the owner against various damages and losses that may arise as a result of owning a car. It is important for all car owners to understand how auto insurance works to ensure that their vehicles are protected and in compliance with the law.
Car Insurance Is Required by Law
Unlike other common types of insurance like health insurance, life insurance and homeowners insurance, a certain amount of car insurance is required by state law. The requirements vary from one state to another, but typically states require drivers to carry a minimum level of bodily injury liability and property damage liability insurance. Required coverage will pay for damages that you cause to other drivers and their property but it will not pay for damage done to your own vehicle.
Collision Coverage and Comprehensive Coverage Are Optional
Collision coverage is auto insurance that pays for damage to your vehicle that you incur while driving, while comprehensive coverage pays for other types of damage like storm damage, fire damage and vandalism. Both of these types of coverage are optional and add to the cost of an insurance policy. Collision coverage and comprehensive coverage are most important for drivers with valuable vehicles that they would be unable to replace in the event of damage.
Car Insurance Has Limits
Just because you carry auto insurance, you are not necessarily protected against all costs that may arise from auto accidents. All auto insurance policies cover damages up to certain limits, and if damage exceeds those limits, you may have to pay for them out of your own pocket. For instance, if your liability coverage has a $25,000 limit for property damage and you sideswipe a $50,000 car, the damage you cause could exceed your coverage limit.
Price Is Based on Risk
The fees or premiums you pay for auto insurance are based on how risky the insurance company thinks it is to insure you. Drivers that are younger, male and that have had accidents or tickets in the past will tend to face higher insurance costs. Since older drivers are typically considered less risky, you may stand to save money on car insurance by switching to new policies as you age.
Tags: auto insurance, Collision coverage, coverage limit, property damage, that arise
