Basic Auto Insurance: Common Questions and Answers

Understanding auto insurance can be confusing. Here are answers to some common questions to help you navigate the basics:

1. What is auto insurance?

Auto insurance is a contract between you and an insurance company. It provides financial protection against accidents, theft, and other damages involving your vehicle, as well as liability for injuries or property damage you may cause to others.

2. Why do I need auto insurance?

Auto insurance is required by law in most places. It protects you financially by covering repair costs, medical bills, and liability claims if you're involved in an accident.

3. What are the types of coverage?

• Liability Insurance: Covers damages to others’ property and medical expenses if you're at fault.
• Collision Coverage: Pays for repairs to your vehicle after an accident.
• Comprehensive Coverage: Covers non-collision incidents like theft, vandalism, or natural disasters.
• Personal Injury Protection (PIP): Covers medical expenses for you and your passengers.
• Uninsured/Underinsured Motorist Coverage: Protects you if you're hit by a driver without adequate insurance.

4. How is my premium determined?

Insurance premiums are calculated based on factors like your driving history, age, location, type of vehicle, and the coverage you choose. Discounts may apply for safe driving, bundling policies, or having safety features in your car.

5. What should I do after an accident?

• Ensure everyone is safe and seek medical attention if necessary.
• Exchange information with the other driver(s).
• Document the scene with photos and notes.
• Contact your insurance company to report the accident.

6. How do deductibles work?

A deductible is the amount you pay out of pocket before your insurance covers the rest. For example, if your repair bill is $2,000 and your deductible is $500, your insurance will pay $1,500.

7. Does auto insurance cover rental cars?

Many policies include rental car coverage, but it's essential to check your policy or ask your insurer. If not, you may need to purchase additional coverage from the rental company.

8. How can I lower my premium?

• Drive safely and maintain a clean record.
• Opt for higher deductibles if you can afford them.
• Look for discounts, such as multi-policy or good student discounts.
• Regularly compare quotes from different providers.

9. What happens if I let my policy lapse?

A lapse in coverage can lead to higher premiums in the future and leave you financially vulnerable if an accident occurs. Always keep your policy active.

10. Is auto insurance transferable if I sell my car?

No, auto insurance is tied to the policyholder and the specific vehicle. If you sell your car, you'll need to update your policy for a new vehicle or cancel it.

Understanding these basics ensures you're well-prepared to choose the right auto insurance and handle any situation on the road.