What is Auto Insurance?
Updated May 3, 2024 | Published August 8, 2022
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Categories:
- Auto Insurance
- For Drivers
- Insurance Basics
At WebFirst Insurance, we know that buying insurance can be a daunting process. We want to make this process easier for those curious about auto insurance.
What is Auto Insurance?
Auto insurance is a contract between you and your insurance company that protects you against financial loss in the event of an accident or theft. In exchange for paying a premium, the insurance company agrees to pay your losses. Basic personal car insurance is mandated by many U.S. states. When purchasing auto insurance, you have many options for your policy. Auto insurance policies are normally on a six month or one-year basis, renewing at the end of the term.
Coverage
Auto insurance provides coverage for three things:
- Property – damage or theft of your car
- Liability – your legal responsibility to others for bodily injury or property damage
- Medical – the cost of treating injuries, rehabilitation, and sometimes lost wages and funeral expenses
Who is covered by your auto insurance policy?
You, as well as any family members on your auto insurance policy, are covered. Your policy also provides coverage if someone else is driving your car. For a personal auto policy, any instance of personal driving is covered by your insurance, such as commuting to work, dropping off your children at school, or driving to the grocery store. Any commercial driving is not covered, such as delivering food for a business. Driving for a ridesharing app, such as Uber or Lyft, is also not covered under your personal auto policy.
How is car insurance priced?
The amount of money you pay for your insurance policy is known as your premium. The deductible is the out-of-pocket expense that you are required to pay before your insurer will cover your claim. For example, if your deductible is $500, and your car repairs cost $2,000, your policy will cover the remaining $1,500. The higher your deductible, the higher your out-of-pocket expenses, but the lower your rates will be as well.
What is “gap” insurance?
Auto insurance covers the market value of your car, not what you paid for it. If something happens to your car, there may be a gap between what you owe on your car, and what your policy covers. Gap insurance pays the difference of this for you. Contact our agents to learn more about gap insurance.
Make sure these are part of your policy
Though auto insurance requirements vary from state to state, you will have the legal auto insurance requirements in most states if you purchase these:
Bodily injury liability
Covers costs associated with injuries or death that you or another driver causes while driving your car.
Property damage liability
Reimburses others for damage that you or another driver operating your car causes to another vehicle or property, such as a fence or building
Collision coverage
Covers your vehicle if it overturns or collides with another vehicle or object, including trees, guardrails, or fences.
Comprehensive coverage
Protects against damage to your car from events beyond your control, including theft, windshield and glass damage, vandalism, falling trees and more.
Medical payments or personal injury protection
Provides reimbursement for medical expenses for injuries to you or your passengers.
Uninsured motorist coverage
Reimburses you when an accident is caused by a driver who does not have auto insurance, or in the case of a hit-and-run. You can also purchase under insured motorist coverage, which covers cost when another driver lacks adequate coverage to pay the costs of a serious accident.
Personal injury protection and uninsured motorist coverage are not required in every state, but it’s a good idea to purchase them for greater financial protection. For an exact list of what your state requires, please search for your state’s auto insurance requirements, or speak to one of our agents.
Car accidents are always scary. There are many things you can do to prevent them, but unfortunately there are times where it is out of your control. Head to our blog for some tips for safe driving, as well as a list of what to do in the event of a car accident. Consider choosing WebFirst Insurance, LLC, to help you get the right auto insurance for your needs, at an affordable price.