Car insurance is one of the most important financial purchases you make. It provides you with financial protection if you are involved in an accident or if your car is damaged for other reasons. Often, people have basic questions about coverage that can be easily answered. While the specifics of what precisely is covered in your policy can be answered by looking at your actual policy documents, here are some of the broad frequently asked questions about auto insurance coverage.
Does My Coverage Extend to Rental Cars?
The answer to this question depends on what kind of car insurance policy you have and what type of accident occurs. In broad terms, most collision auto insurance will extend to damage that occurs if you cause an accident, regardless of whether it is your own personal car or a rental car. Collision coverage only pays for damages to the car you are driving and may not cover damages to the other person’s car which are covered by liability insurance and required by law in almost all states.
Another form of auto insurance that may provide coverage to rental cars is personal injury protection or PIP insurance. Since this is a no fault form of insurance, it will pay for physical injuries that occur in an accident regardless of who is at fault. However, personal injury protection coverage only extends to injuries and does not pay for property damage to either car involved in an accident.
My Car was Hit by a Flying Tree Limb in a Storm. What Kind of Car Insurance Pays for the Damage?
If you park under a tree or there is a storm that causes tree limbs to fall on your car, this kind of coverage is usually covered by your comprehensive car insurance policy. Collision insurance pays for damages that are caused by events other than car accidents. For example, if your car is stolen, is hit by an animal or damaged in a fire, it should be covered under a comprehensive policy.
Am I Required to Buy Car Insurance?
Liability auto insurance is a legal requirement in almost every state. You need to purchase liability car insurance if you want to drive legally or register your car. In most cases, you need to purchase auto insurance before you are allowed to take possession of a car if you buy it from a car dealership. The minimum amount of insurance varies from state to state, although it is often a very small amount of car insurance.
Another type of car insurance that you may be legally required to purchase is no fault or personal injury protection (PIP) auto coverage. This type of insurance pays for physical injuries regardless of who is at fault in an auto accident. It pays for medical treatment, hospital expenses and rehabilitation. It is also commonly applied to lost wages and legal expenses that result from an accident.
What Kind of Auto Insurance Do I Need if I Buy a Car?
If your car is leased or you have an auto loan, your lender will require you to purchase comprehensive and collision insurance in addition to liability insurance. Both comprehensive and collision auto insurance policies provide coverage if your car is damaged or stolen, unlike liability insurance which only pays for damages to the other person’s car. If you buy a car from a dealership, you will need to supply proof of insurance before you will be allowed to take possession of the car, regardless of how old the car is or if it is financed.
Why is My Credit Rate Important?
Unfortunately, if you have a poor credit score you will likely pay a higher premium for car insurance. Car insurance companies use your credit score as one factor in determining your premium rate. Insurance companies consider financial behaviors as part of financial responsibility and high risk behaviors. Maintaining a good or high credit score helps lower your car insurance premiums.
Is My Car Covered if Someone Else is Driving it and has an Accident?
In most cases, if the person driving has your permission to drive and you believe they are capable of driving the car safely, then your auto insurance coverage will extend to them also. Keep in mind that every person in your household who has a driver’s license must be listed on your auto insurance policy. If the person driving the car lives with you but is not listed on the policy when the accident occurs, the accident may not be covered.
At Insurance Swami, you can find more information about auto, life and homeowners insurance. Be informed before you enter into an insurance arrangement.