Car insurance works as a guarantee for your financial well-being and that of your vehicle in the event of accidents, thefts or other incidents beyond your control. Your car insurance company can pay for vehicle repairs, medical expenses, and any damage or injury you cause to another driver. It is important to note that car insurance does not cover maintenance or general wear and tear. Auto insurance works by paying for injuries and property damage caused by different covered sources.
The damages covered by your policy depend on the amount of car insurance you have and the fault for the damage. When you have an accident, at-fault driver liability insurance usually pays for vehicle repairs and medical bills. If you are at fault, you will have to use your own car insurance to pay for your expenses, as your liability insurance can only be used for other people. Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft.
In exchange for you paying a premium, the insurance company agrees to pay your losses as described in your policy. When you are at fault for an accident that causes bodily injury or property damage, your liability insurance can help cover other people's medical bills and repair costs. If you are sued for causing the accident, liability insurance also pays the costs of your legal defense. Without sufficient liability insurance, you may have to pay for any expenses that exceed the limits of your policy.
From Mother Nature to road debris, countless dangers can damage your car. While state-required liability insurance can pay for repairs to other drivers' vehicles in the event of an accident, having the right coverage for your own vehicle can help pay for vehicle repairs. If you are responsible for an accident, liability insurance covers the cost of medical treatment for injuries and repairs for property damage caused to others. It can also cover your legal costs, such as an attorney's fees, if someone sues you for damages after an accident.
Usually, you will want to buy enough liability insurance to cover what you could lose in a lawsuit. While most states require liability insurance, the exact limit requirements vary by state. Collision coverage applies to your own vehicle after an accident. Regardless of what hits your car, such as another vehicle or object, collision coverage can help you pay the cost of repairs.
If your vehicle is total, collision coverage pays you the actual cash value of your vehicle, minus any deductibles. Getting car insurance quotes is easy, but knowing what to look for when comparing options can be more difficult. If it is later found that you are not at fault, your insurance company will attempt to recover those costs, including your deductible, from the other driver's insurer through a process called subrogation. Different types of car insurance coverage work a little differently, depending on the driver at fault, the type of damage caused, and the state in which the accident occurs.
When you buy car insurance, you will choose coverage limits that determine the amount of financial protection you receive from your policy. Your insurer may have a list of approved repair shops that you work with, but you can also choose your own. Lenders or leasing companies may require you to take out comprehensive and collision insurance to protect their interests in your car. To fill that gap, insurance companies began offering auto towing coverage which pays for trailers not related to accidents.
If your car needs a trailer, you can usually choose where to tow it; otherwise, the towing service will take you to the nearest repair shop. An insurance claim is like making a record of the fact that you damaged your car and that your insurance company verifies. Regardless of who is at fault for an accident, medical payment coverage (sometimes called MedPay or PIP) can cover your injuries or those of your passengers. These policies may be unnecessary for many customers as credit card companies such as Visa and MasterCard now offer additional collision damage coverage to rental vehicles if the rental transaction is processed with one of their cards.
Depending on your policy coverage, damage to your own car may also be covered even if you were at fault. If you exceed your insurance mileage limit and have a low mileage discount or a classic car plan, your premiums may increase.