Auto insurance is the policy that protects a vehicle owner or user from liabilities that arises from the possession and usage of the vehicle.
Auto insurance covers a lot of area. Some of them are:
o Comprehensive Insurance: This coverage offers protection for damage to the car that was not caused by accident. These include fire, theft, animals, natural disaster and others, apart from things that are on the exclusion list.
o Collision: This is the coverage that protects you when your car is damaged in an accident and you are at fault. It would pay the expenses for the repair of your vehicle. A car is declared “A write off” or “total loss” if the cost of repair is more than the market value. So what they would do in such a case would be to pay the actual value of the car, minus deductible and then the car would be auctioned off to be used as scrap.
o Liability insurance: This is the minimum required in most states. It covers the payment for expenses incurred if you’re found at fault in an accident. The coverage would pay for medical bills for bodily injury and repair of damage to property of the third party. Some times the cost of the repairs and medical bills maybe way higher than the limits of this coverage. That is why it is wise to have more than the liability coverage.
o Actual cash value: This is paid when the vehicle is destroyed or damaged. The actual cash value is calculated by subtracting the depreciation from the replacement cost.
o Replacement cost: This is the amount it would cost to replace the vehicle in case of damage or destruction, without considering the depreciation cost.
o Depreciation: This is the value of the vehicle as it is affected by wear and tear and age.
In all the 55 states, it is illegal to operate a vehicle without insurance. Because of this, most people just buy the most basic of all the policies in order to save cost. Instead of doing this, I suggest that you take out a little extra time and shop extensively online. Check out quotes from different insurance companies, compare their prices and at the end of your research you’ll be pleased to find out that you did not really need to under insure your vehicle to save cost.