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What is auto insurance?
- Financial protection when driving: Auto insurance is a contract between you and an insurance company. You pay premiums, and in exchange, the company agrees to provide financial protection in case of accidents, theft, damage, or other covered events involving your car.
Why it’s important
- Pays for car-related losses: Helps cover the costs of repairing or replacing your vehicle, damages you cause to others’ property, and medical expenses if you or others are injured in an accident.
- Legal requirement: Most states require a minimum level of auto insurance (often liability coverage) to drive legally.
- Peace of mind: It provides financial protection should accidents occur, preventing devastating financial burdens.
Common types of auto insurance coverage
- Liability insurance:
- Bodily Injury Liability: Covers medical expenses and lost wages if you injure someone in an accident.
- Property Damage Liability: Covers costs to repair another person’s vehicle or property you damage in an accident.
- Collision insurance: Pays to repair or replace your car if it’s damaged in a collision with another vehicle or object.
- Comprehensive insurance: Covers damages caused by non-collision events, like theft, vandalism, fire, weather, or hitting an animal.
- Uninsured/Underinsured motorist coverage: Protects you financially if you’re hit by a driver with no insurance or insufficient insurance to cover your damages.
- Medical payments coverage (MedPay) and Personal Injury Protection (PIP): Cover medical bills for you and passengers injured in an accident, regardless of fault.
Factors that affect your premiums
- Driving record: A history of accidents or traffic violations could raise costs.
- Age and experience: Young and less experienced drivers generally pay more.
- Location: Urban areas with higher crime or accident rates may have higher premiums.
- Type of car: High-performance or expensive vehicles cost more to insure.
- Coverage levels and deductibles: Choosing higher coverage and lower deductibles will increase premiums.
Important to Note: Specific coverage types and requirements can vary by state.