What is auto insurance?
An auto insurance policy is a contract between you and an insurance company. You pay a premium. In exchange, the insurance company promises to pay for specific car-related financial losses, within the selected coverage limits, that you may have during the term of the agreement. Most states require that you carry automobile liability insurance in certain minimum amounts. If you are at fault in an accident the law requires that you pay the damages sustained by the person who is not at fault. These can include property damage, which is the cost to repair or replace any property that you have damaged. These can also include damages for personal injuries, which include not only the other person’s medical expenses and lost wages but also damages for pain and suffering, permanent injury, and loss of enjoyment of life. These damages can come to thousands of dollars even for a minor accident. That’s why adequate insurance is essential to your economic health. Return to top.
Owning a car involves several risks. When a car accident occurs, people may be injured and vehicles (or other property) may be damaged. Damage can also occur through theft, vandalism, or natural disasters. Auto insurance can protect you against these risks. Insurance companies provide auto insurance through Personal Auto Policies (PAPs). A PAP is a contract between you and your Insurance Company, specifying each partys rights and obligations. Essentially, your Insurance Company promises to provide specific coverage for you in return for your payment of a premium.
Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage: – Property coverage pays for damage to or theft of your car. – Liability coverage pays for your legal responsibility to others for bodily injury or property damage. – Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses. An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you’re financing a car, your lender may also have requirements. Most auto policies are for six months to a year. Your insurance company should notify you by mail when its time to renew the policy and to pay your premium.
