How Does Car Insurance Work?

Posted on: 3 February 2021

If you are beginning your life as an adult, you will probably have questions about bills and expenses. One question you might have is how car insurance works. If you never purchased a policy yourself, but need to now, you might not understand how it works. If you have questions about auto insurance, here are several vital things you should know that might help you understand how it works.

Auto Insurance Comes in Many Types

The first thing to know is that you cannot just call an insurance company and purchase a one-size-fits-all policy. Auto insurance does not come like this, as it includes many different types. When you call, you can ask for the coverage types that you need. Here are the three most popular types you can include in your plan:

  1. Liability coverage – Having liability coverage is typically a requirement by law in most states. With liability, you have the protection you need for damages you might cause to others if you collide with another vehicle.
  2. Collision – If you want coverage for your car in the case of a collision, you can add collision coverage.
  3. Comprehensive – If you want coverage for other types of damages you might experience with your car, add this type. It covers animal collisions, storm damage, and theft.

An agent can further explain each type to you if you have questions.

The Types You Need Depend on Several Factors

Some people choose all three types of coverages, but others might choose liability only. The types you choose depend on several factors, and the first factor is your car loan. If you have a car loan, you will not get a choice. The lender will require you to have all three types. If you do not have a car loan, you can choose. The second factor is your car's value. If you drive a cheap car that is not worth a lot, you might not need collision and comprehensive coverages. If your car is expensive and valuable, though, you might want to add all three types.

If you need other types of insurance coverages, you can bundle your policies with one company. Bundling means that you purchase all your coverage from one company. When doing this, the insurance provider might offer a discount on your plan. If you have questions about car insurance or need to start an auto insurance policy, call an insurance agent today.