subject: Auto Insurance - How It Works [print this page] Auto Insurance - How It Works
Auto Insurance works similarly to heath, life, or other various forms of insurance. Auto insurance companies supply their customers with liability coverage that have certain amounts and limitations. The insured individual is then given a set payment, which is also known as a premium. These set payments can either be paid monthly or yearly; and they can greatly differ depending on factors such as age, sex, and driving history.
Coverage for Auto Insurance
There are a plethora of different types of coverage that are offered. If we broadly grouped them, we find two categories of coverage which include collision and comprehensive. In a nut shell, comprehensive coverage offers insurance liability coverage for expenditures involved with an accident, usually according to a specific set policy limit. Conversely, collision coverage is more restricted; and it doesn't cover as much as comprehensive coverage.
Auto Insurance: Types
Two major forms of auto insurance include no-fault and standard. No-fault is rare and coverage is provided equally without considering whose fault the accident was. In standard insurance, liability is distributed depending on the individual that is held responsible for causing the accident.
Auto insurance companies work by taking on the risks of motorists. When you pay the company your monthly or yearly payments, they choose to take on the risks that are associated with driving an automobile. For example, if a light pole falls on your car, or you get into an accident that is not your fault, but the other motorist is not insured; then the insurance company that you are paying will have to defend and pay for you. Liability insurance pays for the damage that you are accountable for. If you did more damage than your policy covers, then the rest of the money has to come out of pocket.
So, it is considered a safer bet to go with a full coverage insurance option, since it covers everything doesn't leave anything on you. Even though you will have a higher premium, all repairs corresponding to your accidents will be covered. Ultimately, you are paying a small fee to others to take on the responsibility of paying for accidents. Many people all over the world have automobiles, so having auto insurance is an important investment. All 50 states in US require drivers to have at least liability insurance, and in some states, more coverage may be mandatory. Fines of more than 500 dollars can be given to uninsured drivers, and sometimes even prison terms.
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