Car insurance is mandatory for drivers all across the United States except those in New Hampshire. There, the state will allow drivers to forego insurance, provided they can show financial responsibility and can afford to pay for an accident if they are liable.
Purchasing a policy is certainly not inexpensive, so why do you need car insurance? The right car insurance policy can save you a lot of money and headaches in the event of an accident. Even if you don’t own a vehicle, you might want to consider a non-owner policy. This policy would allow you to drive on vacations, when you might rent a vehicle, and could potentially cause damage to another vehicle in an accident, and it could help keep your future rates from increasing. Having a non-owner policy means you won’t have a lapse in coverage.
Types of Important Insurance Coverages
The Zebra reminds us that liability is one of the main reasons car insurance is mandatory. When you are responsible for injuring another person, you need to pay for any damages you caused. That is why 49 states require you to carry bodily injury and property damage insurance. This liability insurance coverage will provide some financial relief for victims in an accident that you caused. While you may only be required to carry your state’s minimum coverage, you will need to carry coverage for damage to your own vehicle if you have a loan or are on a lease program.
This important coverage, The balance points out, includes collision and comprehensive. These two first-party coverages pay for damage to your vehicle, regardless of fault. Collision will pay for damages to your vehicle in a collision, no matter whether it was with another vehicle or a stationary object, or replace your vehicle if it was totaled. Comprehensive coverage pays for your vehicle damage that is not accident-related. For example, it may cover weather damage, vandalism, theft, animal contact, etc. Both comprehensive and collision have a deductible that you must meet.
The best car insurance policies include vehicle repairs and replacements, reimbursement for damages to the other party or parties from an accident you cause, GAP coverage, auto rental while your car is being repaired, and roadside assistance. Once you report the claim to your insurance company, your representative should be there managing the process and helping answer any questions you have. Shopping around will help you find a policy that pays for medical expenses that your health insurance may deny. You may even find a policy that covers dental work.
Why Having Car Insurance Is Important
To legally register and drive your vehicle, you will likely be required to show that you carry at least the minimum limits as required by your state’s laws. If your vehicle is new and a lessee or bank is financing the purchase, you may be required to purchase additional coverage such as collision and comprehensive.
There are numerous reasons why having car insurance is so important. For one, insurance can compensate you when you’re in an accident caused by someone else’s negligence. As the victim, you may have injuries and physical damage that should be compensated. If no one carried insurance, you would likely need to file a lawsuit against the negligent party. Money Under 30 says there’s no guarantee that you would receive compensation, and you would have legal fees to pay.
Even if you do get a judgment in your favor, you would need to take extra steps to enforce the judgment and collect your money. You could be waiting years for the defendant to have any money to make payments — if payment ever comes. With car insurance, you could receive payment quickly.
Another reason insurance is important is for you to compensate someone else for your negligence. If you didn’t have insurance, the other party could obtain a judgment against you. It could wreck your credit rating and leave you feeling uncertain about your future.
Auto insurance can also protect your assets. If you own a business or property, you want to protect them from a court judgment. When you have assets to lose, you may want to maintain higher liability limits. If you have insurance, another party can pursue a claim through your insurance in order to satisfy the claim.
What Is Non-Owner Insurance and Who Needs It?
Non-owner insurance is also called non-driver insurance, which offers some liability coverage for bodily injury and property damage in the event you’re driving a car you don’t own. Most people purchase the minimum limits of this coverage, but you can increase your policy limits. Some non-owner policies cover medical payments.
Experian notes that non-owner policies only cover liability. Comprehensive or collision coverage is not available on a non-owner policy because this coverage is based on specific vehicles.
Sometimes, a court may require a driver to get a non-owner policy to satisfy the terms of a court order. In cases involving serious moving violations, such as driving under the influence, the court may require a non-owner policy before you will be allowed to retain your license. The insurance company will then file a document, known as an SR-22 in most states, that certifies that you have the required amount of insurance.
How Your Insurance Premiums Are Calculated
Knowing what factors can increase your premiums can help you make a more informed decision on what insurance policy to purchase, according to The Hartford. Here are some of the most important factors you should consider:
- The type of vehicle you drive. Some vehicles can lower your premiums, while others can increase them. Some luxury vehicles will cost more to insure because their market values are higher. It may be harder to source parts, making them more expensive to repair.
- An older vehicle will likely cost less to insure because a new vehicle will have a higher market value and could be more expensive to repair or replace. In general, a car that’s a couple of years old will be cheaper to insure than a new car to insure since parts can readily be sourced.
- The risk of theft also influences your insurance policy premiums. If your vehicle is popular among thieves, then your premiums could be higher. Insurers need to account for the increase in risk for your vehicle.
When you’re ready to purchase car insurance, remember that the right policy can help protect you, your loved ones, and other motorists on the road. If you get into an accident, you can rest easy knowing you have the right coverage to take care of any damage you cause as well as get reimbursed if the other driver is at fault.
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