What is the simple explanation of car insurance? In this article, we’ll look at a few of the key concepts behind the cost of car insurance. In general, a higher insurance limit means a lower risk, but it also means paying more. There are several factors that determine the cost of car insurance, though the type of vehicle plays a major role. Large luxury vehicles are generally more expensive to insure, while small to midsize SUVs are more affordable.
An insurance policy’s main section is called the insuring agreement. This document spells out what the insurer has agreed to cover and who you, as a policyholder, are responsible for. Among other things, the insuring agreement explains who is covered under the policy, including the drivers named on the declarations page and the people who live in the household. It also outlines any exclusions that apply to the coverage.
Comprehensive coverage pays for damages that your vehicle might sustain in a collision. If you accidentally hit a deer, for example, your car would suffer $1,000 of damage. Your insurer would pay for the rest of the repair bill, and even help with any funeral costs. Your insurance provider would then cover the remainder, minus the deductible. As you can see, there are many benefits to having comprehensive coverage, but it’s not mandatory.
Liability coverage pays for damages to other people, and bodily injuries are covered under personal injury protection. Property damage insurance, on the other hand, pays for the repair of other people’s property. The minimum amount of coverage depends on your state’s regulations. No-fault insurance, sometimes called “personal injury protection” insurance, is designed to compensate accident victims regardless of who caused the accident. The policy will pay the cost of medical treatments, lost income, and rehabilitation for those involved in the accident.
