Guide: How Does Car Insurance Work?
by Colin Cherry
Car insurance is designed to protect the insured person against losses. Unlike other insurance, it is also intended to protect other people against losses arising from an car accident that was the fault of the insured person.
An car insurance policy is made up of coverages that are mandatory for everyone and coverages that are optional at the discretion of the insured person.
Each state stipulates what the minimum mandatory coverages are. They are included in the auto insurance policy in order to make sure that all people injured in an car accident (drivers, passengers and pedestrians) are covered for such things as bodily injury and property damage due to an accident caused by the insured person.
Taking Delaware as an example, the minimum coverage required is $30,000 for all people injured in an car accident up to a maximum of $15,000 for each individual and $10,000 for property damage.
It must be stressed that these are the minimum coverages you must have. As any shortfall between the minimum coverage and the actual amounts claimed may have to come out of your pocket, it would be wise to consider increasing these minimum amounts.
The optional insurance coverages are intended to provide the insured person protection for things not included in the mandatory requirements. Below is a list of the most common options available. In some states these are not optional but are mandatory.
PIP - Personal Injury Protection
This is mandatory in several states and is intended to provide coverage for injuries sustained by the insured person irrespective of who caused the car accident.
Collision Coverage
This covers the insured person for damages to their car when involved in a collision with another vehicle or object. Note: In some states where collisions with deer are common, a special option for just such an event may be needed over and above the normal collision coverage.
Un-insured Coverage / Under-insured Coverage
When the insured person suffers bodily injury or property damage as a result of an vehicle accident caused by an uninsured, underinsured or hit and run driver, this cover will pay for any expenses involved.
Of course, these options will increase the cost of the car insurance policy. When it comes to the amount of money you pay for your policy (the premium), the insurance company will take into account many factors to arrive at the total cost. Your age, driving record and the type of car you are insuring will all be considered. Where you live also has an impact on your insurance premium cost.
Aug 10, 2008
Guide: How Does Car Insurance Work?
