Insurance made simple
Understanding car insurance can be quite a challenging fete. Given that car insurance is mandatory in the majority of the states, it is necessary that you understand the basic terms that are used in insurance.
Car insurance is basically an agreement between a car owner and the insurance company, which offers protection for the car owner against financial loss in case of an accident, theft or damage to the car. In exchange, the owner of the car has to pay a premium to the insurance company.
There are three main insurance coverages which are property, liability, and medical coverages.
Liability damage covers any damage that the car owner or any other driver operating the car might cause to another person’s car or property. In some states, this is the minimum requirement for a car insurance. It is also referred to as third-party liability coverage.
Comprehensive insurance provides coverage against damage from an incident such as a collision, vandalism, fire, or floods. It also provides coverage against theft. It also covers damage that the car owner might cause to another person’s car or property.
Personal Injury Protection (PIP) or Medical Coverage offers treatment or medical coverage for passengers in the policyholder’s car. This type of insurance covers the medical bills, lost wages, as well as costs for the funerals in case of a fatality. However, the passengers are covered only until a certain amount, say $5,000 each, depending on the insurance policy.
Other types of insurance coverages include collision insurance, which covers your car from damage that might result from any form of collision with another car or an object. There is a maximum limit to which your insurance company will cover damage caused by a collision. Similarly, it has a minimum deductible. Higher maximum limits and lower deductibles attract higher insurance premiums.
Each state has unique insurance requirements. Be sure to consult your state laws to determine what type of insurance you require.