Car Insurance Facts For Dummies

Car insurance facts for dummies.

If it is the first time you get car insurance or you never spent any time researching  car insurance in the past this is your chance of getting a basic understanding of the facts and terminology of car insurance. Don’t worry about the dummies part of the title, as the popular line of self help books says, “it is a reference for the rest of us”. The fact is that few of us have spent the time necessary to research all the terms that control car insurance. Some of these terms are quite specialised and belong in the legal profession which explains why so few of us understand them.

How does the Car Insurance industry work?

Let’s start by explaining what makes the wheels of the car industry spin. How is business kept in motion and how is profit made? Well, it is important to understand that Car Insurance like all insurance provides protection from the possibility of something occurring to your property, to you or your family and dependents. In the case of car industry the insurance protects you from the financial consequences of your car being stolen or damaged and the physical injuries it causes on you and the passengers in the car. Because the Car Insurance company is not actually selling you something tangible, just the promise of cash if things go badly in the future, many don’t understand the way that premiums are worked out and how to tell a good insurance apart from a bad one.

Liability insurance

This is the most important type of car insurance. It is so important it is obligatory in most countries or states. Liability insurance protects you from the financial responsibility when you damage another car, cause injuries (or even death) to others. You must check that your liability insurance is at least as high as the minimum of your country or state. A good rule of thumb is to at least have 25,000 /50,000 dollars in liability insurance. This means that the insurance company will provide up to 25,000 for a single person and up to 50,000 when there are multiple victims.

Property damage or liability insurance

This insurance will pay for any property damages you cause if you are in the wrong in an accident. This protects against damages to other cars, public and private property. You can fix your property damage liability insurance as high as you want, although this will affect your premiums.

Comprehensive insurance

This type of insurance provides financial protection when your own car is damaged by vandalism, bad weather, etc… or when it is stolen. This type of insurance can really pump up the price of your premium. You can control the cost increase by adding deductibles to this (and any other) insurance types.

Deductibles are a feature in car insurance where you cover the first xyz amount on a potential claim. For example if you have a 1,000 dollar deductible you will pay the first 1,000 dollars on any claim on the insurance the deductible applies to.