Car insurance works as a protection for your financial well-being and your vehicle in the event of accidents, thefts, or other incidents beyond your control. Your car insurance company can pay for vehicle repairs, medical expenses, and any damage or injury you cause to another driver. Keep in mind that car insurance doesn't cover maintenance or general wear and tear. Collision coverage applies to your own vehicle after an accident.
No matter what hits your car, such as another vehicle or object, collision coverage can help you pay for the cost of repairs. If your vehicle adds up, collision coverage pays you the actual cash value of your vehicle, less any deductibles. Car insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for you to pay a premium, the insurance company commits to paying your losses as described in your policy.
When you have an accident, at-fault driver's liability insurance generally pays for your vehicle repairs and medical bills. If you're at fault, you'll need to use your own car insurance to pay for your expenses, since your liability insurance can only be used for other people. For this reason, insurance companies offer coverage against underinsured or uninsured drivers to help you if someone crashes into your car and you don't have enough or no liability insurance to cover your injuries or damage to your vehicle. In addition to the above coverages, many insurers also offer more specialized types of policies, such as vintage or classic car insurance and rideshare insurance for people who drive for companies such as Uber or Lyft.
In addition to pay-per-mile policies, casual drivers can save by taking advantage of usage-based insurance. If you are found to be at fault in a car accident, liability coverage can pay for damage to other vehicles, damage to objects, injuries to other drivers and their passengers, and lawsuits if you are sued for an accident. Even if PIP and uninsured motorist coverage are optional in your state, consider adding them to your policy for greater financial protection. With so many options for car insurance companies, it can be difficult to know where to start finding the right car insurance.
When you file a claim, either with your own insurance company or with someone else's, the insurance company will send an adjuster to investigate the incident and make an official determination of fault. If you are sued for causing the accident, liability insurance also pays for your legal defense costs. Deductibles are the amount of money you have to pay before your insurance company covers the rest of a claim. Drivers with poor credit will generally pay higher car insurance rates, sometimes much higher than drivers who have an accident on their record.
Car insurance is mandatory in every state except New Hampshire (New Hampshire still requires financial liability if you cause an accident, so you'll want to have adequate insurance). Without car insurance, drivers would be at risk of financial ruin every time they get behind the wheel, as serious collisions can cost hundreds of thousands of dollars in property damage and bodily injury. Before your collision insurance covers repairs to your vehicle, you'll likely have to pay a deductible.