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The Benefits and Importance of Car Insurance

Car insurance is a necessary evil if you drive or own a car in order to protect your current and future personal assets. Those who choose not to carry insurance are doing so at great risk, in addition to violating the law in the state in which they live. All states require at a minimum, some proof of financial responsibility, such as a minimum level of liability insurance in the event you are found at fault in a motor vehicle accident that causes damage to another’s personal property. Without proper proof of bodily injury and property damage liability insurance, car owners cannot legally register or maintain registration on their vehicles. Most states also require uninsured or underinsured motorist that will cover the driver in the event of a hit and run accident or if you are involved in an accident with someone that is without insurance or is underinsured. Insurance protects the driver and other drivers on the road from possible financial ruin in the event of significant damage to your vehicle or to those of others. Depending upon the driver’s needs, there are different types of insurance at all different types of limits.

Purchasing a car is a significant investment for many people. Most cannot afford to purchase a car outright from a car dealership. Therefore, they need to secure financing to purchase a vehicle. Banks and finance companies will not lend money to purchase a vehicle unless they are assured that they will not suffer a loss if the vehicle is damaged or totaled in an accident, or if it is stolen or vandalized. Because of this, these institutions will require the purchaser to secure their loan with a guarantee of insurance. The level of insurance that is required will be over what is required by the state minimum of liability protection. Car owners will need to purchase collision and comprehensive insurance to protect their investment. Collision covers the repair or reimbursement for the car in the event that the driver is at fault in an accident. Comprehensive covers repairs or reimbursement for the car in the event of damage from a natural disaster or weather event, theft or vandalism, or from a collision with wildlife. The insurance company will reach a settlement with the financer if the car is still in the process of being paid for and will pay the remaining balance, minus the amount of the deductible chosen on the policy. If the remaining balance is more than what insurance covers, the owner is responsible for the remainder. However, if the insured has guaranteed asset protection (GAP) coverage, the remaining balance will be satisfied through that. If the car is owned free and clear, the insurer will pay for the cost of repairs, minus the deductible or reimburse for the value of the car minus the deductible.

The medical expenses from a car accident can quickly add up. To protect drivers from this unexpected expense, medical coverage is also available as optional insurance coverage. If the driver does not have health insurance, this coverage is very important to have. Twelve of the fifty states in the United States have instituted the policy of no-fault when it comes to injuries in car accidents. This means that fault is not assigned in regards to either driver in covering injuries in an auto accident, so each driver is responsible for their own upfront medical costs. This is referred to as personal injury protection and insurers offer different levels that affect the injured driver’s ability to sue the other driver (or their insurer) for injuries received in an accident. Insurers have implemented this as a way to save money on litigation costs.

Having the proper insurance coverage to protect one’s assets from being tapped into in the event they cause a serious car accident is extremely important. Without it, assets such as homes, savings, or salaries can be sought after to award damages to those who suffer loses as a result of any car accident that a driver may cause. The benefits of having coverage are insurmountable when considering what could be lost without having it.

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