In most states, a lot of people get car insurance because they are legally required to do so. But not many realize how important it can actually be. Being able to afford a car isn’t viewed enough in many states; it needs to be coupled with proof of the ability to pay for damages that a car can potentially cause. If you want the shortest and cheapest route to owning a car, minimum-coverage insurance should be enough but it’s not recommended. To help you understand the different types of car insurance and their importance, we’ll be providing you with a brief overview.
How Does It Work?
Car insurance follows a very basic concept of paying yearly premiums to maintain a policy. If you happen to be a lucky person who doesn’t get into an accident for the whole year, you won’t be getting back the premium you paid. The good news is that you get a discount known as No-Claim Bonus, which significantly lowers the premiums you have to pay later. If you get in a serious enough accident that you’d like to claim for compensation, the insurance company will ensure to cover the damages that you’ve agreed to in your contract. There are various types of coverages suitable for different drivers, but it’s usually better to err on the side of safety.
Leasing and Loaning Requirements
Many people are often under the misconception that insurance is separate from any financing options available on the market. It’s not really uncommon for car dealerships to require you to purchase insurance before they help you finance the car through a lease. The type of coverage that’s often chosen is collision coverage and comprehensive coverage. The main reason behind this request is the insurance of their investments. Some insurance policies like gap insurance take care of paying for the rest of your car’s loans or payments if it’s stolen or wrecked. It’s usually not a requirement but it can be quite convenient.
When it comes to buying or leasing a car, the type of premiums paid on the insurance policy varies. Many people in Ontario, Canada choose to explore cheaper options for cars before negotiating on the premiums and deductibles they’ll pay on their insurance. You may not realize it at the right time but buying a car that’s a bit cheaper can actually help you save a lot on what you’ll pay.
Financial Coverage
If you’re in a state or country that doesn’t require you to purchase car insurance, you’ll be liable for the coverage of all the damage you cause with your car without one. These costs are more than most people realize; it includes car repairs, legal fees, medical expenses, and lost wages. This liability coverage will ensure that you have financial protection that can help you avoid paying thousands of dollars in expenses for a car accident.
Comprehensive Policies
Amongst all types of insurance policies, comprehensive insurance is known to be the most versatile and inclusive insurance policy that can be coupled with regular ones. It includes a myriad of coverages that allows a driver to have their mind at ease when it comes to any major or minor damage.
Nature-Caused Accidents
Events outside of anyone’s control like environmental calamities or disasters are all covered under comprehensive insurance. Events like lightning, flood, earthquakes, and others are considered natural calamities.
Man-Made Events
Malicious activities like theft, burglary, and terrorism are covered under comprehensive insurance, in addition to unintended damage caused when the car is in transit.
Falling objects, civil disturbances, and damages caused by animals are also included in comprehensive insurance. The amount of compensation that you receive for damages is based on your deductible. Every time you file a claim, the deductible is deducted from the total compensation; the limit often depends on the policy and actual cash value of the vehicle.
Collision Coverage
The mandatory car insurance only pays for the damages you cause to other vehicles, but it leaves your own vehicle at risk. Paying for the expenses for these damages can easily get out of hand, especially in serious accidents that could total the car. Collision coverage is the type of coverage you should be looking for if you want to ensure that you don’t pay money out-of-pocket for repairing your own car in the case of an accident.
Medical Coverage
Auto insurance can provide coverage to you in the case of an unfortunate accident that resulted in medical injuries. The medical expenses are covered in personal injury protection and medical payments coverage; they may also extend to cover the medical expenses of other passengers who may have sustained injuries from the accident.
A lot of people may get confused with all the technical jargon and odd terms that they hear, making them feel a bit overwhelmed when they’re choosing an insurance policy. You may want to invest some time in learning about the various types of auto insurance policies to make sure you’ve got the perfect one for you.
