How Auto Insurance Works

It is estimated that there are around 35 million uninsured drivers in the U.S. This number changes drastically depending upon the state you are in. Sometimes, this is based on the cost of auto insurance. Other times, it’s because drivers are not sure which auto insurance provider to go with. 

Finding the right insurance can be confusing. Learn how auto insurance works and which policies you absolutely cannot afford to skip. 

Car Insurance Pricing

Car insurance is priced using a number of variables. It is also not uncommon to get vastly different quotes from different companies. These can include:

• The type of car being insured
• How long has the policyholder been driving
• The age of the policyholder
• Driving record

There are a few terms you should know about when you start looking for auto insurance. One term you may see is the premium. This is simply the amount of money you have to pay the insurance company to cover your vehicle. 

Another term is deductible. This is an amount you pay before the insurance company will pay out. You can raise your deductible to bring down the overall cost of your insurance. 

For example, imagine you have an accident that requires $2,000 worth of repairs. If your deductible is $500, you pay this amount, and the provider will fund the other $1,500. 

Types of Auto Insurance

Not all auto insurance offers the same coverage. You may find certain policies only cover some accidents, while others do not. Here’s a breakdown of the most common types of auto coverage in California.

Liability

If you are responsible for a car accident, then you are liable. Financially, this means you will have to cover the costs for the victim’s vehicle repairs and medical bills. It is the most basic form of cheap auto insurance, often known as minimum coverage. 

Liability insurance can be divided into two parts. Depending upon the rules in your state, you will probably have to get both. These two parts cover:

• Damage to personal property
• Bodily injury/physical damage to other involved parties

Keep in mind that liability only covers the victim(s), not yourself. Additionally, this means you will have to pay for your own medical bills and vehicle repairs out of pocket.

Comprehensive

Comprehensive insurance is one of the more misleading policies. It sounds like this type of insurance covers all aspects of the accident. However, it does not. In fact, it only covers damage to a vehicle caused by anything other than another vehicle. This includes:

• Vandalism
• Theft
• Hitting an animal
• Adverse weather damage

Nothing covered under liability insurance comes under comprehensive. Therefore, no medical bills or car repairs from a traffic accident are paid out. Additionally, it does not cover if you hit a stationary object, like a mailbox or a wall. 

Car owners may opt out of this type of coverage. However, for those who leased a car or took out a loan to purchase a car, comprehensive insurance is needed. In fact, it is often required, per the terms of the lease or loan agreement.

Collision

You can think of collision coverage as an extension of comprehensive coverage. It provides coverage for your car, even if you are not driving when the collision takes place. For example, if your friend is the driver when the accident occurs, collision insurance would cover the accident. 

Unlike comprehensive, this auto insurance covers collisions with stationary objects. However, collision coverage does not cover any damage to other involved vehicles, nor does it cover medical bills. 

Collision insurance is most beneficial to new drivers who are prone to nicks and dents. 

How to Find Affordable Auto Insurance

Sometimes, choosing the least pricey auto insurance is not always the best option. If you’re involved in an accident with minimal coverage, you will end up in a financial dilemma.

The best policy should be the one that provides the most auto coverage for your lifestyle at an affordable price. 

For example, full coverage offers liability, collision, and comprehensive coverage. However, most drivers may not need all of that. If you have an older car, collision coverage may not be worth the payoff. 

Therefore, make sure you speak with a range of providers and shop around for the best deal. There are well-known providers, as well as smaller local firms. Online price comparison sites are a great resource. Just keep in mind that these sites take an affiliate fee, so it may be worth contacting the companies yourself. 

What Auto Insurance Does Not Cover

Even with full coverage, there are some areas that your policy will not cover. For example, the coverage that is not typically covered includes wear and tear. If your car is suffering from general age-related problems or failures, then you will have to pay for this out of pocket.

If you want to add people other than yourself to the policy, this will also need to be done separately. That means your policy will not transfer to other drivers in your car, or if you are driving in someone else’s vehicle. 

Lastly, you will not be covered if you are a contracted driver for a rideshare company. Any service like Uber or Lyft has very complicated insurance needs. You will need specialist business coverage for this.

Auto Insurance Claims

When you have an accident or become involved in an auto insurance claim, it is always best to get legal representation. Insurance companies are trained to reduce settlements in car accident cases. This can mean you don’t get the payout you deserve. To prevent this from occurring, consult with an experienced personal injury law firm. 

DK Law has recovered over $300 million in compensation and verdicts for injured victims. If you were involved in a car accident and have questions, contact us and schedule your free consultation today.