- 11 Feb 2021
- 5 minutes
If you are a bit familiar with the basics of car insurance, but the main question that keeps you in the dark is, "how does car insurance work?" We want to let you know that the primary work or function of car insurance is to offer the insured financial protections, should they be the cause of an auto accident or their car got damaged or stolen. Viz. The car insurance company of a policyholder will cover a portion of the cost they may incur from medical bills, property damages and liability, in exchange for a monthly premium.
However, the premium charge may vary with several insurers due to several factors we will talk about. But no matter how expensive they may be, you will indeed find affordable coverage with similar qualities as those offered by an expensive car insurer if you purchase cheap car insurance.
There are a variety of benefits that come with the use of cars to make work easy. However, there are few cases of unforeseen accidents that may cause several forms of damage and losses to life and properties—which may outweigh the benefits of having a car. Most of the damages and losses that result from car accidents require repairs or replacement, which may be quite expensive to afford.
Asides from having to repair or replace a damaged car, there are certain circumstances where you will be found responsible for the accident and would be required to repair or replace not only your car but the other driver's car. If you get involved in an accident that causes injuries to the other driver, you will also have to cover the driver's medical bills and surgical bills depending on how severe the accident might be (if you are at fault).
All of these expenses can place a large hole in the person's pocket and may generate debt. However, if you have auto insurance, such as car insurance, you will not have to bother about the threatening effect of the expenses on your financial stability by ad hoc and compulsory expenses.
What is car insurance?
Car insurance is a requisite type of insurance that offers coverage for the replacement and repair expenses of various damages and losses that primarily originates from car accidents. Asides from being requisite, car insurance is also compulsory because most states in the United States of America obligate drivers to have even the kind of car insurance coverage, else they may be arrested for illegally driving on the road.
Car Insurance Coverage
Car insurance provides coverage for the insured damages and losses that result from accidents in two different ways, depending on the nature, source of accidents and the involvement of a third party. The two types of car insurance coverage include the following:
Liability insurance covers third party damages or injuries from accidents caused by the insured. Many car insurance companies usually offer different types of liability insurance depending on what was damaged or who was injured. The types of liability insurance coverage most car insurance offers include:
Liability insurance for bodily insurance
If a policyholder is the cause of a car accident that causes injuries to the other driver, the policyholder will be responsible for the other driver's medical or surgical bills and lost wages. The policyholder's liability for bodily injuries will cover the medical, surgical and lost wages of the injured driver.
Liability insurance for property damage
Liability insurance for property damages provides coverage for the damages of properties caused by their policyholders. They do not restrict this coverage to other cars alone, but other properties, such as fences, walls, etc.
Underinsured or uninsured motorist coverage
There are cases where you will be involved in an accident caused by the other driver, most of which may not have liability insurance (noninsured), and some at-fault drivers may have liability insurance that can not cover the medical expenses of your injuries (underinsured). If you are involved in such, your Medical experience will be covered by your underinsured or uninsured motorist coverage.
Property damage coverage
Property damage coverage is the other type of car insurance coverage that financially protects from damages done to their car caused by several factors, such as car collision, fire, vandalism and theft.
Property damage coverage subdivides into two coverage depending on the cause of the car damage. They are:
This offers coverage for car damage caused by colliding with another car or other objects, such as a tree. You may choose not to apply for this coverage because it is optional.
Comprehensive coverage, as its name implies, covers the cost an insured may incur from car damages from all other causes, such as flood, fire, vandalism, and theft.
Factors that influence the rate of car insurance
Just like every other type of insurance, policyholders with car insurance policies will be required to pay a premium charge monthly and annually, on a regular basis. However, irrespective of how similar the coverage of several insurance companies may be, they usually have different premium costs primarily influenced by age, and other factors, such as location, credit history, etc. These factors may be the cause of your expensive car insurance coverage.
If the insured is old, most Insurers believe they have hearing and vision loss contributing to their increased accident susceptibility level. Insurers also believe that young drivers are more susceptible to car accidents due to irrational decisions and avoidable distractions. Hence, this factor simultaneously leads to an increase in the premium charges of an insured.
Car insurance provides the insured with financial protection should they be involved in an accident in which they may be at fault or not. Most insurance companies usually charge more for their coverage after considering factors like age, credit history, etc. Still, you can make your car insurance cheap through several processes, such as bundling your home with your auto insurance and requesting a higher deductible.