Auto insurance is one of the most important purchases you will make.
While auto insurance probably isn’t something you think about too much, the reality is that auto insurance is a big deal. necessary purchase, not an option – so you need to make sure you find the right coverage.
So why do you need auto insurance if you’re going to have a car (or drive one)? Here are three big reasons why covering up is essential.
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1. Almost All States Require Auto Insurance
Auto insurance is generally required by law before a person can purchase or register a vehicle. While there are variations in the types and amounts of coverage required by states, virtually all states require drivers to have certain types of auto insurance policies.
Specifically, most states require motorists to carry liability insurance for bodily injury and property damage. Both protect others on the roads. If a driver causes an accident, they could be held liable for physical injuries sustained by other people – and damages resulting from those injuries, such as medical bills and lost wages. A motorist could also be held liable for property damage. Liability policies ensure that a driver has the money to pay these costs.
Some states also require other types of coverage. A driver may need personal injury protection, which includes paying for their own medical bills and lost wages in minor crashes, no matter who is to blame. And a motorist may also need uninsured or underinsured coverage, which covers their own personal losses if someone else causes an accident but does not have sufficient insurance to cover damage to the vehicle. other driver.
A driver who does not have the insurance required by his state could be fined or cited for proof of insurance. This is considered a misdemeanor in some cases. No one wants to face fines, criminal penalties, or more expensive insurance in the future just because they haven’t met the minimum coverage requirements.
2. A lender may require that drivers be covered.
When someone gets a car loan, there’s a good chance their lender will ask them to purchase insurance. In fact, they are likely to need more assurance than their state mandates.
Many auto lenders require people to purchase collision insurance, which pays for repairs to the vehicle if that insured causes an accident. Comprehensive coverage is usually also mandated to cover repairs or replacement of a vehicle if it is stolen or damaged by something other than a collision (such as a falling tree).
And gap insurance might also be required. He pays the difference between what someone owes on their car loan and the amount their insurer would reimburse them if their car was totally destroyed. This is important because the fair market value an insurer will pay is often less than what a motorist owes.
Lenders may be authorized by the auto loan agreement to purchase very expensive insurance and charge the driver for it if they let their policy expire. And in some cases, they could even repossess someone’s car if they are required to have coverage and don’t comply.
3. An insurance policy can protect a driver’s assets
Even if no state or lender requirements applied, purchasing auto insurance would still be essential.
This is because without it, a driver could be financially responsible for anything that goes wrong. This could mean paying all legal fees and damages if a motorist causes an accident and injures someone. Or it could mean covering all the costs of repairing or replacing their own car if something happens to it.
Auto insurance is such an important form of asset protection that you may want to consider purchasing more than your state or lender requires. This is because the minimum coverage limits are usually quite low. It would be easy to cause someone more damage in an accident than an insurer would pay if a driver had only minimal coverage.
Remember, if you don’t want to take on the full risk of a potential problem occurring, make sure you have insurance to share that risk. Paying premiums can be worth it for an insurer to commit to covering major losses if and when they occur.