Auto insurance is a crucial part of life for car owners in the United States. It not only protects you financially in the event of an accident, but it’s also required by law in most states.
Whether you’re a new driver or someone seeking to understand the ins and outs of auto insurance, this guide will walk you through everything you need to know about auto insurance in the USA.
What is Auto Insurance?
Auto insurance is a contract between a car owner and an insurance company. In exchange for regular premium payments, the insurance company provides financial protection against potential losses, including vehicle damage, bodily injury, or legal liabilities resulting from car accidents.
Insurance policies typically cover two main categories:
- Damage to Your Vehicle:
collision coverage, which pays for repairs or replacement of your car if you are at fault in an accident - Liability for Injuries and Property Damage to Others:
This covers the costs if you cause an accident that results in bodily injury or property damage to others.
Key Terms in Auto Insurance
Premium: The amount you pay for your insurance coverage, usually on a monthly or annual basis.
Deductible: The amount you pay out of pocket before your insurance coverage kicks in
Coverage Limit: The maximum amount an insurance company will pay for a claim. Policies often have limits for different types of coverage.
Policyholder: The person who owns the insurance policy.
Claim:
A request made by the policyholder to the insurance company for payment after an accident or damage to the vehicle.
Types of Auto Insurance Coverage
Auto insurance policies can vary in terms of coverage, and the type of insurance you select
- Liability Coverage:
- Bodily Injury Liability: Covers medical expenses,if you’re responsible for an accident that injures someone else.
- Collision Coverage:
- Pays for repairs to your vehicle if you are at fault in a collision, regardless of who caused the accident.
- Comprehensive Coverage:
- Covers damages to your car that are not caused by a collision, such as vandalism, theft or hitting an animal.
- Personal Injury Protection (PIP):
- Often called “no-fault insurance,” PIP covers medical expenses for you and your passengers after an accident.
- Uninsured/Underinsured Motorist Coverage:
- Protects you if you’re involved in an accident with someone who doesn’t have insurance
- Medical Payments Coverage (MedPay):
- Covers medical costs for you and your passengers, no matter who is at fault in the accident.
