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Understanding the basics of Automobile Insurance

Car insurance is mandatory because accidents do happen. When an accident occurs, only an insurance cover can save you from having to chuck out a considerable amount to cover for your losses.

Whether you caused the accident or someone else did it, your insurance cover should be able to cover it. The extent to which your insurance policy will cover you will depend on the insurance options that you’ve opted for.

Whenever we buy a new car, we think of driving it to our loved places with family and friends. We want to drive it off with full freedom. But the thing is that we cannot drive our new car anywhere we want if we don’t have auto insurance.

Auto insurance has always been one of those pesky financial necessities in life. Although we don’t like to pay for it, you will be happy you did if, unfortunately, you get involved in an accident.

Car insurance (also referred to as car or motor insurance) is purchased to cover the vehicle from unexpected risks.

It essentially protects you from losses incurred as a result of unforeseen events. It helps protect against theft, financial damage as a result of accidents, and any subsequent liabilities.

When buying an insurance policy, you need to first consider the combination of coverage that you want without you overpaying and the insurance company to handle your claim if and when an accident occurs. Do not rush when making this decision.

There are plenty of options to choose from, making a choice a step at a time. Below are primary insurance policy covers that you should prioritize.

Personal liability or personal injury?

Your safety and that of your family should come first. When putting up an insurance package, personal liability cover should always come first. When an accident occurs, the first thing that is asked for in any medical facility is your health insurance.

If you own a car or other vehicle, you must have car insurance.

Car insurance may protect you from:

  • Having to pay to get your car or other vehicle repaired if damaged or involved in an accident.
  • Liability claims if you’re held accountable for an accident causing damage to another person’s vehicle or injury to other people​.

This happens even before treating you. In a case where you have not applied for health insurance, load your injury with a hefty coverage; this way, all medical expenses will be taken care of with ease.

Major Accidents:

This is known as the worst-case scenario that should never be ignored when getting a car insurance policy. Other than accidents, natural calamities do occur that can completely wreck your car, your insurance should be able to take care of this. Have enough insurance coverage to cater for repairs or entirely replace the vehicle.

Getting stranded:

A car has rubber parts, electric, and mechanical components. At any given point, any of these components can go wrong, and this is not something that you have control over. The only power you have is by preparing yourself in advance by getting proper car insurance cover.

When discussing the insurance deductible and premium, the deductible is always inversely proportional to the premium amount. When the deductible amount is low, the premium goes higher and vice versa.

This means the amount you remove from your pocket will determine how much the insurer will hand you. Make a wise decision when taking cover that way, your deductible is always low.

Receiving a monthly premium that is a bit higher will save you from making a large payment when an accident occurs.

Insurance companies do recommend different types of coverage to different drivers depending on their driving experience. For starter drivers, it is safe to have a premium personal liability cover.

In this case, the insurance deductible should be very low since new drivers make plenty of mistakes. This can also apply to other experienced drivers. Driving carefully will prevent you from paying higher premiums.

Choose a reasonable and reliable car insurer. This will make your work more manageable when you need your claim paid on time. You should note, for similar coverage, different companies offer different prices.

Who a car insurance policy covers

When you are involved in an accident, your car insurance policy will cover:-

  1. The driver driving the car.
  2. All the passengers sitting inside the car.
  3. And other people involved in the accident.

What a car insurance policy covers

collision car insurance
Source: Carsurance

If you claim a loss or an incident covered by your policy, coverage is the maximum amount of money the insurance provider can pay you.

Mandatory insurance coverage

Drivers in Canada’s provinces and territories are required to have minimum coverage. Some provinces may have higher coverage requirements than others.

Liability insurance

Liability insurance covers damages caused by the car to others, such as accidents or death. It also includes damage to other vehicles caused by your vehicle. If the amount of the losses or injury exceeds the liability cap, you will be responsible for the remaining portion of the settlement.

The cost of maintenance to your car is not covered by liability insurance. To cover these expenses, you will need to consider extra insurance.

Accident benefits/bodily injury insurance

When you get involved in an accident, your medical expenses and loss of income will be covered under these accident benefits.

Collision insurance

If you collide with another car or object, collision insurance may cover the cost of fixing or replacing your car. This is sometimes included as part of the required insurance policy.

Comprehensive insurance

Comprehensive insurance covers the cost of repairing or replacing your car due to other types of damage or loss. This includes:-

  • Vandalism
  • Damage to your windshield
  • Theft

What a car insurance policy does not cover

Most auto insurance plans do not cover the theft of personal belongings from your vehicles, such as golf clubs, clothing, or personal electronics.

How an insurance company calculates premiums

Premiums are the amount you pay to buy insurance.

Insurance companies can consider the following factors when deciding how much you’ll pay in premiums:

  • your age
  • your gender
  • where you live
  • what car you drive
  • how much you use your car
  • your driving record
  • your claim history
  • the type of coverage you choose
  • the amount of your deductible

A deductible is the amount of your claim you agree to pay before your insurance company pays the rest.

Shop around for the lowest insurance premiums

Your premiums can differ depending on the insurance provider you choose. Before settling on a single insurance company, it’s essential to browse around, get quotes, and compare rates. Combining your home and car insurance can qualify you for a discount in some cases.

How Does Car Insurance Work?

How Does Car Insurance Work
Source: F1 Racers

Automobile owners pay a monthly insurance fee to cover themselves against financial damage due to road accidents and theft.

An insurance company’s premium amounts are determined by various factors, including the potential cost to repair the insured car, the danger associated with the insured motorist, and crime levels in the region where the insured motorist lives.

When an insured motorist requests compensation for a loss covered by the insurance policy, the insurer collects all its premium payments into one large pool, which is used to make payouts.

A financial loss that occurs outside of the scope of an insurer’s policy will not be covered, so read your contract carefully before signing up.

If you have any questions about your policies, you can directly talk with your insurance agent to better understand.

Why do you have to buy auto insurance?

Although there are many important reasons to make sure that your vehicle is insured, the following are the top three:

  1. To remain legal while on the road.

Auto insurance is mandatory to have when you own a car. It is financial responsibility. This means that if you have insurance, you have the financial means to cover the expenses of an accident.

  1. To protect your vehicle.

Cars are the second most expensive investment for the average citizen. The more you rely on your car and the less likely you are to replace it yourself if anything goes wrong, the more critical auto insurance becomes.

  1. To protect the health and welfare of your family.

Consider hefty fines for not having valid insurance if you are involved in an accident or are required to provide evidence of insurance by a police officer.

Insurance is costly, but an accident can be much more expensive. One of the top three reasons to purchase car insurance is for accidents and medical expenses.

What is a claim?

A policyholder’s formal appeal to an insurance provider for coverage or compensation for a covered loss or policy case is known as an insurance claim.

The allegation is checked by the insurance provider (or denies the claim). If the claim is accepted, the insurance provider may pay the insured or an approved, interested party on the insured’s behalf.

Choosing Insurance Company:

It is important that you choose an acceptable auto insurance policy. Different policies have different benefits. Other policies have additional quotes as well.

This is why doing some research before making a final purchase is so important. Take a look at some of the easiest ways to find the best car insurance online.

  1. Select the correct form of cover

Third-party and comprehensive car insurance are the most common types of insurance. A third-party insurance policy, as the name implies, only covers third-party accidents.

Comprehensive insurance covers all third-party liabilities as well as your car. As opposed to a detailed plan, a third-party plan is less expensive.

Just check what your requirements are and then choose the right plan accordingly for yourself.

  1. Look for discounts

From time to time, car insurance companies deliver promotions and discounts. Always keep an eye out for these exclusive offers and discounts. If you find a good one, your auto insurance cost will reduce a lot.

  1. Look for a good deductible option.

The perfect auto insurance policy provides a strong balance between premium and deductible. So, to get the most benefit out of your auto insurance online package, select your voluntary deductible wisely.

  1. Register with an automobile association

Car insurance benefits are available to those who are members of a well-known automotive association. If you haven’t already done so, this is an excellent reason to do so.

  1. Check the claim process.

Buying an insurance policy is incomplete. It should be able to deliver when you need it the most – during a claim.

As a result, double-check the claim process to make sure it’s appropriate. This would go a long way toward ensuring that you have adequate auto insurance coverage.

Filing a Car Insurance Claim:

Car Insurance Claim
Source: NEA Member Benefits

An auto insurance claim is a procedure in which an insured person asks his or her insurance provider to compensate him or her for the damages to his or her vehicle due to an accident.

There are two types of claim processes for a car insurance policy, they are:

Car insurance cashless Claims:

You do not have to pay any upfront for the repairs at the garage after the accident on this type of claim.

Your insurance provider will be responsible for settling the claims with the workshop on behalf of you. But the damages must be covered in the insurance policy taken by you.

Car insurance reimbursement Claims:

For this, you have to first pay for the repairs of the damage to the garage, and later car insurance company will reimburse you the damage cost depending upon the terms and conditions.

But do not forget to submit the bills and repair receipts to your insurance company while asking for reimbursement.

What is SR22 insurance?

SR22 is not insurance but a form provided by an insurance company that shows the liability coverage on your car insurance policy.

People mistakenly refer to it as “SR-22 insurance”. An SR-22 is a form you file with your state to show that you have the minimum auto liability insurance required by your state.

In Virginia and Florida, and SR-22 is also known as a certificate of financial responsibility or an FR-44.

How much auto insurance coverage do you need?

Liability insurance does not protect you or your vehicle, but it does protect your pocket!

Liability insurance covers third-party expenses you’d generally be liable for—medical or auto-repair costs that others might incur as a result of the accident—if you’re in an accident that’s considered “your fault.”

So, how much liability coverage do you need? That can be summarized in two words: a lot! And if your state doesn’t require liability insurance, it’s a smart idea to get at least $500,000 in coverage covering both property damage and bodily injury liability.

That way, you’ll be responsible for damages such as having the other driver’s car repaired (property damage) as well as missed income or medical expenses (bodily injury) as a result of an accident in which you were at fault.

You would be liable for covering the other driver’s property damage and personal injury expenses out of pocket if you didn’t have liability insurance.

This will jeopardize your financial situation, and your future earnings will be garnished before the damages are paid. Liability auto insurance is a must-have regardless of the type of vehicle you drive.

How Does My Car Insurance Coverage Break Down?

When looking at your auto insurance coverage limits, you may see something like $250,000/$500,000/$250,000 or 250/500/250 for your liability coverage.


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