Auto insurance - what is it and why do we need it?
Auto insurance protects you against financial loss if you have a car accident. It is a contract between you and the insurance company that you have a policy with. You agree to pay the insurance premium and the car insurance company agrees to pay your losses as defined in your car insurance policy.
Auto insurance has three parts:
1. Property coverage pays for damage to or theft of your car.
2. Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
3. Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy has many different kinds of coverage. Most states and provinces and even car financing companies require you to buy some, but not all, of these insurance coverage's. Typically people purchase insurance for 1 year at a time but other options are available such as day permits, monthly, quarterly or BI-annual insurance. Your car insurance company should notify you by mail when it's time to renew the policy and the amount to renew your policy.
Legally, as a driver of a vehicle, you are financially responsible for that car and any damages that may be caused by your vehicle. This financial responsibility is why we are required to have valid insurance for our vehicles. If you cause an accident that results in damages greater than the coverage you have you will have pay that amount back to your insurance company, possibly for the rest of your life.
Local laws generally specify the minimum coverage amounts for auto insurance. You may find it prudent to purchase greater coverage in order to protect your auto investment, pay for necessary medical expenses, cover your legal liability, and cover any additional losses related to automobile ownership.
