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by Insurance Assistant
One of the most important decisions any responsible driver will have to make is what to do about insurance, specifically auto insurance.
The bottom line is: You don’t want to be caught without car insurance. The financial and legal risks are just too great to operate a motor vehicle without some kind of auto insurance.
Liability coverage on your vehicle is mandatory in 47 of the 50 states, according to insurancejournal.com, and at least 23 states have reporting systems that prevent drivers from renewing the registration on their cars without proof of auto insurance.
Sure, in those states that don’t have a reporting system, you can save money in the short term by canceling a policy right after you register your car, but then you risk being uninsured in case of an accident and having to repurchase an auto insurance policy when you have to register the following year. And generally, one of the factors in setting auto insurance rates are continuation of coverage. If you cancel or allow a policy to lapse, renewal rates are often higher, so what really have you saved?
If your car is financed through a bank, loan company or auto dealership, you are required to carry comprehensive auto insurance that covers both your vehicle and others involved in an accident with you.
Let’s take a closer look at some of the issues regarding car insurance and the types of car insurance available in the marketplace:
Why should I carry auto insurance?
You simply don’t want to assume all of the risks you would face if you were in an accident, even if it isn’t your fault. Regardless of who is at fault, you could be responsible for replacing your vehicle and for any injuries that might have occurred, depending on the circumstances.
What are the main the main types of car insurance?
Liability — Liability car insurance only covers the other vehicle involved in an accident with you. If your car is paid off and it is worth more than $5,000 you definitely want to consider moving from liability auto insurance to coverage that protects the value of your vehicle.
Comprehensive and collision — This is the the type of auto insurance that is mandatory if your vehicle is financed. You can’t finance a car without this kind of coverage, which not only protects most of your financial investment but also protects the financing institution’s investment. It covers you against a wide range of events such as fire, theft and accidents.
Uninsured motorist — Some states allow this type of auto insurance to be sold separately. Uninsured motorist coverage offers protection if you are involved in an accident with another driver who may not carry auto insurance or is underinsured.
No fault (Also known as PIP, or Personal injury protection) — This coverage will pay for medical costs that you, your family and any passengers you might have if you are involved in an accident. Some states do require this type of coverage, however, according to bellaonline.com.
These are the main types of coverages, but there are many other umbrella coverages that offer a wider range of benefits if you feel you need them. Consult with your auto insurance carrier to see which ones you think you might also require.
How are auto insurance rates determined?
Age, sex, education, driving record, the type of car you drive and where you live are just some of the factors that auto insurance companies use in setting rates for their customers.
We will discuss these issues more in depth and answer some of your frequently asked questions inside.