Whether you like it or not, the law in most states demands that you must have auto insurance coverage before hitting the roads. According to 2019 estimates, the average American spends about $1,674 on auto insurance. Before you take that brand new vehicle on the road, ask yourself, ”what auto insurance do I need?” Here are some considerations to help you pick the best coverage.
Considerations Car Owners Should Make When Looking for Insurance
Consider the following points when looking for auto insurance.
Coverages
A car insurance policy is only as helpful as its coverage. Coverage means the items that the insurance company will compensate in case of a car accident. Before enlisting for any insurance policy, ensure that you know what the company is willing to pay. Ask the insurance agent to give you more information or search the internet for any clues.
So, what auto insurance do I need? There are different types of car insurance plans that vary widely across insurance providers. Basically, you should have a third-party car insurance cover at all times. It covers you against physical injury, loss of property, and death of a person apart from you who happens to be in your vehicle when the accident occurred. However, a comprehensive cover would be the best in this case because it covers the vehicle owner so that you don’t have to foot your health bills out of pocket.
Claim Settlement Ratio (CSR)
Another essential factor to consider when choosing an insurance cover is the company’s claim settlement ratio (CSR). The term simply means the percentage of insurance claims the company has received since it began operations compared to the number of claims it has settled. Don’t settle for a company with a negative claim settlement ratio. If they couldn’t compensate a large number of clients, there is a high chance they will also reject your claim when you file one.
Network Garages
If you bought a new car, some insurance companies offer to repair any damages to your car up to the end of the plan’s validity. This is known as a cashless vehicle repair service. Before buying an insurance plan, do a thorough background check to determine how wide and strong the company’s cashless garage network is.
Brand Reputation
When shopping for a car insurance policy, choose the most recognized brand out there. The reason behind this is quite simple. A big well-known brand has a reputation to protect. If you settle for a brand that enjoys a considerable presence in the market, they will most likely keep their word. More prominent companies have left a significant footprint in the past and can’t afford to ruin it by defaulting on a single insurance claim. In most instances, you will tell the company’s reputation from the huge number of satisfied clients.
State Requirements on Insurance and Effects of Accidents Without Insurance
Car insurance policy is generally considered a major but important cost of owning a vehicle in many countries. You are probably asking “what auto insurance do I need, “maybe in Colorado? You need none. Most states have insurance covers incorporated into their laws but not all 50 US states require auto coverage. Some states will allow you on the roads provided you have an alternative to insurance coverage.
Some of these states include Virginia and New Hampshire. However, there must be an alternative to cover damages arising from a car crash. For example, drivers are expected to have up to $25,000 for property damage and $50,000 for liability. Additional punishment includes having your registrations and licenses suspended.
You can skip having car insurance cover in Virginia if you pay an annual fee of $500 to the state. Note that that amount doesn’t provide any coverage, and the driver who caused the accident is still liable.
Other states offer drivers a leeway of proving their financial responsibility in place of car insurance. They will purchase a bond for not less than $10,000 which the state will use to cover the claims. States offering a bond option include;
- Alabama
- California
- Colorado
- Delaware
- Wyoming
- Oklahoma
- Tennessee
What About Accidents?
You must be wondering what would happen if there is a car crash and either both or one party don’t have a car insurance cover. Whatever happen, will largely depend on who was at fault.
If you were at fault, you would have to compensate the other driver for damage to property, health, and even death from your pocket. Note that whether you have an insurance cover or not, the aggrieved party has a right to recover damages from you, meaning they may take you to court. Normally, the insurance company covers the legal fees, but you will have to settle the amount from your pocket in this case. The state may also choose to deregister and suspend the driver’s license on top of other serious consequences.
If the other driver was at fault, you would have to get compensation from their insurance company by filing a third-party claim for the damages caused to life and property. In the case where they don’t have an insurance cover, you have a right to sue for compensation. Familiarize yourself with the statute of limitations in your region not to lose that window of opportunity.
Forms of Car Insurance
There are several forms of car insurance depending on what the package will cover when an accident occurs. Here are a few answers to the “what auto insurance do I need question:
1. Liability Insurance (BI/PD)
Liability insurance is a third-party cover policy that will compensate other individuals for their bodily and property damage. It mainly consists of property and bodily harm liability. This means that if you caused the collision, your insurance company would cover the medical expenses, funeral expenses, damages, and legal fees in case the other party goes to court. However, they won’t cover any damage to you or your vehicle.
2. Medical Payments Insurance (MedPay)
As the term suggests, medical payment insurance covers medical treatments, such as injuries caused by your vehicle and your passengers. Fortunately, the insurers don’t consider who was at fault while footing medical bills. However, the cover is only available in some states.
3. Comprehensive Insurance
A comprehensive vehicle insurance policy is more detailed and continues from where the collision insurance coverage leaves off. This means that the cover protects you against other damages to your car that don’t arise from colliding with another vehicle. The package includes civil disturbances, theft, natural disaster, vandalism, and more.
4. Collision Insurance
Collision insurance covers damages to your car caused by crashing with cars and other objects. The cover also includes damage from guard rails and telephone poles. Generally, the collision coverage insurance cover protects the client from rollover and other related accidents.
5. Personal Injury Protection Insurance (PIP)
PIP and MedPay are similar only that PIP is more comprehensive because it will protect the client against medical bills and other losses such as wages arising from the accident. For example, if a passenger was involved in the accident, the insurance company will pay the medical bills and the amount they would have earned for that period they were at home nursing injuries.
This insurance cover is more popular with no-fault insurance because some states have it as a requirement.
6. Underinsured Motorist Insurance / Uninsured/ (UIM /UM)
Most states that drivers have some form of car insurance before they hit the road, but some rogue motorists will still travel without one and cause collisions while at it. This insurance package will protect you when your car gets involved in a collision with an uninsured vehicle and the owner can’t afford to compensate you for physical and property damage.
The cover may also cover the client against damage caused by hits and runs. Talk of helping the other driver to protect you!
What is a No-Fault State?
A no-fault state is the complete opposite of other insurance policies. Typically, a motor insurance policy will cover damage to your vehicle caused to third-party occupants. They will file a claim with your insurance company and will be compensated if you were at fault. However, the no-fault state spells out that drivers under this cover will be paid for their injuries and property damage regardless of who was at fault.
Everyone must file a claim with their respective insurance companies. In most states, drivers who wish to have a no-fault cover must first sign up for a personal injury protection cover. The rules in these states are strict, and one must reach certain threshold conditions to get the cover. The rules also define to what extent the no-fault rules apply.
So, what auto insurance do I need in a no-fault state? One that will cover your irrespective of who was at fault. Here are some points to remember;
- No-fault insurance cover foots the medical bill through the personal injury protection cover.
- Even under no-fault rules, the at-fault party will pay for damaged property.