Car insurance is required in many states but provides more than financial protection. It also helps prevent accidents, and it gives you peace of mind.
Many factors determine your car insurance rate, including the year, make, and model of your vehicle; safety ratings; the cost to repair or replace your car; and how much you drive it.
It protects your car
Car insurance offers financial protection if you are in an accident, your vehicle is damaged by something other than a collision (like hail or vandalism), or your car is stolen. The most common type of coverage is liability, which is required in most states and can cover the cost of other people’s property damage or bodily injury that you are responsible for. You can also add comprehensive collision coverage to protect your vehicle from certain losses.
Your insurance company will calculate your premium based on factors like your driving record, the make and model of your vehicle, how much you use it, and safety features. Typically, most lenders require a minimum liability coverage before lending you money for another big purchase.
It protects your family
The right car insurance policy helps protect your family financially in a severe accident. This includes monetary coverage for injuries, property damage, and legal costs. Ensure everyone in your household who drives has the minimum required by law. Also, tell your insurance company if someone in the household is starting to go or is about to turn 16.
Accept coverage to save money. A few extra dollars spent on a better policy could save you thousands in the long run. Understanding the various coverage options and dollar limits is essential before deciding. For example, some types of coverage may have deductibles you must pay before your auto insurance starts to pay.
It protects your assets
Most states require liability insurance, and lenders may also have requirements. But beyond the minimum required, you should consider adding collision and comprehensive coverage to your policy.
Bodily injury liability covers medical expenses, lost income, and pain and suffering for others involved in a crash you cause. Property damage liability covers costs for the other person’s car or other property, such as a fence or building.
The amount of liability coverage you need should reflect your assets. Salvatore suggests calculating your net worth and evaluating how much you could lose in a lawsuit to determine appropriate limits. She also recommends considering uninsured/underinsured motorist coverage and medical payments coverage, which can pay for accident-related medical bills. Also, consider gap coverage, which helps cover the difference between what you owe on your car and its actual cash value if it’s totaled.
It protects your reputation
Whether you’re involved in an accident or have a ticket, auto insurance helps to protect your reputation. Insurance companies consider many factors when creating a policy, including the type of car you drive and where it is parked, credit history, driver safety courses, and more. Meeting with your agent annually is an excellent way to ensure your policy is up-to-date and meets your needs.
In addition to liability coverage, collision, and personal injury protection, it’s a brilliant idea to have comprehensive coverage covering damage to your vehicle – regardless of who caused the accident. This peace of mind is invaluable. And, with some insurers, you can even get a disappearing deductible that decreases each year you remain accident-free.