When you got your first car, you probably simultaneously purchase your first auto insurance policy. You may have done so without much thought. Perhaps you purchased the most affordable policy with the coverage your lender required. If so, you should take the time to learn a little more about how car insurance works, so you can better understand the policy you own.
Understanding how your car insurance works begins with understanding the different types of coverage and which ones your policy has. All car insurance policies have liability coverage. This is coverage that pays the costs of injuries or damage you cause to someone else or another vehicle in an accident. Most states require this by law.
When you buy comprehensive car insurance you must first designate an amount you wish to be covered for. This is usually $100,000.00 but can be more or less depending on your needs. The amount is often listed as property damage on an auto insurance policy because that limit also applies to collision coverage.
Comprehensive car insurance usually comes with a deductible. This is the amount you pay yourself before insurance money is paid. Most insurance companies start you with a $500.00 deductible. You can request to raise your deductible to $1000.00 or even more. That could lower your auto insurance bill significantly, but cost you more when you make a claim.
Many of us know we have to have car insurance in order to get our license and tags. However there are some that don’t really understand the actual policy or how it works to protect us. There are also different requirements for having a loan or lease on a vehicle rather than just owning it out right. Insurance companies ask a lot about our daily lives such as how we use the car, where we park it, and other aspects of driving to ascertain the risk we might pose to the vehicle they are covering.
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