How Auto Insurance Coverage Works?

Auto insurance is basically a contract between you as the insurance holder and the insurance provider who protect you from financial loss in case of a vehicle accident or even theft. In return for your paying an annual premium, the insurer promises to financially assist your losses as defined in your policy in the event that you are in an accident. It is very important to find the right auto insurance for your vehicle and your driving needs. A lot depends on the type of coverage that you want for your auto insurance and your driving history.

The most common auto insurance coverages are liability, personal injury protection and collision. Liability covers medical expenses and other expenses resulting from vehicle-related accidents. Personal injury protection (PIP) pays for lost wages and pain and suffering, but this is not the same as medical payments, which are considered regular expenses under the terms of PIP. Collision auto insurance takes into account any other damage to your vehicle other than a hit-and-run accident. Other optional coverage you may want to consider having for your auto insurance include uninsured/underinsured motorists, temporary roadside assistance, rental car reimbursement and breakdown coverage.

Another thing you should consider before you buy your auto insurance policy is the level of coverage you need for a new car or a second vehicle you plan to purchase. If you have no car loans, then you would have to opt for full collision coverage. Most new car insurance policies also come with a rental car benefit. Asking the agent or the provider for advice regarding the best car insurance policy for a new car and considering its level of coverage is very important.

Good drivers often get discounts from insurers on their auto insurance coverages. If your driving record is clean for five years or less, then most insurers will offer you a discount. The same goes for insuring older vehicles.

Insurers also give discounts to those who want to insure more than one vehicle. They usually charge a higher premium for multiple autos, but it is still worth it because you can insure your vehicle at a lower rate. For example, if you own two vehicles, then opt for a full coverage policy, even if the vehicles are of different makes and models. Your agent can explain the advantages and the disadvantages of such an arrangement. You should also know that if your vehicle is financed, your lender or finance company might require you to have a full coverage auto policy in order to provide financial protection in case you should get into an accident.

Full comprehensive insurance pays for damage to both the insured and any third party involved in an automobile accident. This type of coverage also covers damage caused to the insured’s vehicle due to fire, vandalism, theft and malicious vandalism. The deductible is the amount you will be required to pay in the event you make a claim. The deductible can be set based on the value of your vehicle. If you have a high priced vehicle, it is advisable to increase your deductible.

Liability coverage limits depend on the state you live in. In Michigan, for instance, the limit is $1 million. If you cause an accident that causes the damage or injury of another person or their family, you will have to pay for any medical and repair bills they may need. Your liability limits are usually higher than the auto insurance policy’s limits because in an accident you are not the only one at fault. The insurance policy’s limits will take care of damage to your vehicle, medical and repair costs for the third party involved.

Bodily injury liability insurance provides coverage for legal fees and court costs connected with an automobile accident. It also covers your vehicle if you are found to be at fault in an accident. This type of coverage is normally required by law. The amount of bodily injury liability insurance provided by your insurance company will depend on several factors. These factors include your age, gender, the value of your vehicle and your driving history. When shopping for insurance make sure you get a policy that provides enough coverage for your needs.

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