Three Causes Automotive Insurance Is Crucial – Motley Idiot
Car insurance is one of the most important purchases you will make.
While you are probably not thinking about auto insurance, the reality is that auto insurance is a required degree, not an optional one – so you need to make sure you find the right coverage.
So why do you need auto insurance if you have (or drive) a car? Here are three big reasons why it's important to be insured.
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1. Almost all states require auto insurance
Car insurance is usually required by law before anyone can buy or register a vehicle. While there are differences in the types and levels of coverage that states require, virtually every state requires drivers to have certain types of auto insurance policies.
In particular, most states require motorists to take out personal and property damage insurance. Both protect other people in traffic. If a driver causes an accident, he can be held responsible for bodily harm to other people – and for any resulting damage such as medical bills and lost wages. A motorist can also be held liable for property damage. Liability insurance ensures that a driver has the money to pay these costs.
Some states require other types of coverage as well. A driver may need personal protection that will cover their own medical costs and the driver's loss of wages in minor accidents regardless of fault. And a motorist may also need uninsured or underinsured insurance that will pay for their own personal losses if someone else causes an accident but is not sufficiently insured to cover damage to the other driver.
A driver who does not have the insurance required in their state could be given a ticket or cited as proof of insurance. In some cases this is considered an administrative offense. Nobody wants to expect fines, criminal penalties or expensive insurance in the future just because they did not meet the minimum coverage requirements.
2. A lender may require drivers to have coverage
If someone gets a car loan, chances are good their lender will ask them for insurance. In fact, they are likely to need more insurance than their government mandates.
Many car lenders require people to purchase collision insurance that pays for repairs to the vehicle if that policyholder causes an accident. Full coverage is also usually required to cover repairs or replacements of a vehicle if it is stolen or damaged by something other than a collision (such as a tree falling on it).
And gap insurance might also be required. It pays the difference between what someone owes on their car loan and what their insurer would reimburse them if their car were completely destroyed. This is important because the market value an insurer pays is often less than what a motorist owes.
The car loan agreement may give lenders the right to take out very expensive insurance and bill the driver for it when their policy expires. And in some cases they could even repossess someone's car if they need cover and don't.
3. An insurance policy can protect a driver's assets
Even if there are no government or lending requirements, getting auto insurance would still be essential.
Because without them, 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 your own car if something happens to him.
Auto insurance is such an important form of property protection that you may want to buy more than your state or lender charges. That's because the minimum coverage limits are usually pretty low. It would be easy to do more damage to someone in an accident than an insurer would pay if a driver had minimal coverage.
Remember, if you don't want to bear the entire risk of a potential problem, make sure you have insurance to share that risk. It can be well worth paying premiums to get an insurer to sign up to cover major losses if and when they occur.