Auto insurance is a type of policy that provides financial protection against physical damage or bodily injury resulting from traffic collisions, theft, or other incidents involving vehicles. While most states require drivers to carry a minimum amount of auto insurance, it’s important to understand what the standard auto insurance policy covers and how it works.
What Does the Standard Auto Insurance Policy Cover?
The standard auto insurance policy typically includes several types of coverage:
Liability Coverage
Liability coverage pays for the damages you cause to others in an accident. It includes both bodily injury and property damage liability. If you’re at fault in an accident, liability coverage will pay for the other driver’s medical bills, lost wages, and property damage.
Collision Coverage
Collision coverage pays for the damages to your own vehicle if you’re at fault in an accident. This coverage typically includes a deductible, which is the amount you pay out of pocket before the insurance kicks in.
Comprehensive Coverage
Comprehensive coverage pays for damages to your vehicle that are not caused by a collision. This includes theft, vandalism, fire, and other non-collision incidents. Like collision coverage, comprehensive coverage usually includes a deductible.
Personal Injury Protection (PIP)
Personal injury protection, or PIP, is a type of coverage that pays for medical expenses and lost wages for you and your passengers if you’re injured in an accident. PIP is only available in certain states.
What Does the Standard Auto Insurance Policy Not Cover?
While the standard auto insurance policy provides a lot of protection, there are some things that it doesn’t cover:
Medical Expenses
The standard auto insurance policy doesn’t typically cover medical expenses for you and your passengers. If you want this coverage, you’ll need to add it to your policy as a separate type of coverage.
Uninsured Motorist Coverage
If you’re in an accident with an uninsured driver, the standard auto insurance policy won’t cover your damages. To protect against this risk, you’ll need to add uninsured motorist coverage to your policy.
Car Rentals
If your car is in the shop for repairs, the standard auto insurance policy doesn’t cover the cost of a rental car. To get this coverage, you’ll need to add rental car coverage to your policy.
How Does the Standard Auto Insurance Policy Work?
When you buy an auto insurance policy, you’ll need to choose the amount of coverage you want for each type of coverage. The higher your coverage limits, the more you’ll pay in premiums.
If you’re in an accident, you’ll need to file a claim with your insurance company. The insurance company will investigate the accident and determine who was at fault. If you’re at fault, your insurance company will pay for the damages to the other driver’s vehicle and any injuries they sustained. If the other driver was at fault, their insurance company will pay for your damages.
If you have collision or comprehensive coverage, you’ll need to pay your deductible before the insurance company will pay for the damages. Keep in mind that filing a claim can cause your premiums to go up.
How Can You Save Money on Auto Insurance?
While auto insurance is important, it can be expensive. Here are some tips to help you save money on your auto insurance premiums:
Shop Around
Don’t settle for the first auto insurance policy you find. Shop around and compare quotes from multiple insurance companies.
Choose a Higher Deductible
If you’re comfortable with a higher out-of-pocket cost in the event of an accident, you can choose a higher deductible and save money on your premiums.
Bundle Your Policies
If you have multiple insurance policies, such as home or renters insurance, you can often save money by bundling them together with the same insurance company.
Drive Safely
The safer you drive, the less likely you are to get into an accident. Insurance companies often offer discounts for safe driving habits.
Conclusion
The standard auto insurance policy provides important protection for drivers, but it’s important to understand what it covers and what it doesn’t. By shopping around, choosing the right amount of coverage, and practicing safe driving habits, you can save money on your auto insurance premiums and protect yourself against financial loss in the event of an accident.