Auto Insurance Basics Explained

Car insurance is regulated at the state level and is now mandatory on some level in most states in America. All motorists must have at least liability insurance that generally protects other people’s property and physical damage should you cause an accident.

So if you get into a minor fender bender that causes injury to another driver or damages to someone’s assets, your liability insurance will cover the resulting expenses. While each state has different minimum requirements for liability insurance, you can opt for additional liability coverage through your car insurance company.

What Happens If You Don’t Have Enough Insurance?

Hospitalization and medical expenses can cross the $15,000 mark in a matter of minutes. So if you cause an accident but don’t have enough liability coverage to cover the other person’s medical expenses, you will be personally responsible for paying their bills.

If the injured party sues you, you could end up losing your home or other assets. If you have a job, you could lose your wages or need to file bankruptcy.If you don’t have wads of money lying around and are struggling with funds, getting additional insurance can be worth it if you get in even one moderately expensive accident.

Understanding No-Fault Laws

In some states, it’s tough to recover medical or property damage expenses if an accident is declared “no-fault.” But in some states with no-fault laws, your insurance company is required to pay for such expenses.

Other Types of Coverage

Comprehensive coverage: Comprehensive coverage covers damages to your vehicle from natural disasters, fire, civil commotions, explosions, vandalism, theft, falling objects, acts of terrorism, and more.

Collision coverage: Collision coverage covers damage caused by collisions with other vehicles or objects while driving. Particularly helpful in case of a hit-and-run, where you can’t use uninsured motorist coverage, collision coverage will pay for damages.

What Happens If You Total Your Car?

This means the damage to your car would cost more to repair than the car is worth. In this case, the insurance company figures out the car’s value at the time of damage and pays that amount.