The General Guide to Understanding Car Insurance


With only one exception, every state of the United States plus the District of Columbia requires some minimum liability auto coverage. Only New Hampshire does not require formal auto liability insurance, but even New Hampshire requires that every licensed individual demonstrate some form of financial responsibility. Those New Hampshire residents who would be unable to pay for damages or medical bills arising from an accident in which they were at fault must purchase liability insurance. Residents of all other states must purchase liability insurance whether or not they are able to demonstrate financial responsibility.

Liability Insurance
The point of liability insurance is to pay for damages resulting from the actions of the driver of an insured car. There are many types of insurance coverage that individuals can purchase, but none of those other types are required by any state. When a state requires auto insurance, the requirement includes only liability insurance that pays for property damage and medical bills for the injured party who was not at fault in an accident. Liability insurance does not pay anything toward damages or medical bills for the insured driver at fault. It exists only for the benefit of the innocent party.

Comprehensive and Collision Insurance
Comprehensive and collision insurance is that which pays for occurrences that are or are not the fault of the insured. Comprehensive insurance would pay for repairing damage caused by a hail storm, as example. Collision insurance pays for parking lot “dings” or damage resulting from an at-fault uninsured or underinsured driver. Virtually all lenders will require borrowers to carry comprehensive and collision insurance at all times until their loans are paid. Lenders have no further interest or right of input after the purchaser pays off his loan, but until the loan is paid and the title is transferred to the purchaser, lenders require continuous comprehensive and collision coverage to protect their investment.

Other Add-On Services
Most auto insurance companies offer an array of added services and types of insurance. None of these other types of insurance are required either by law or by lender. They are offered only as added services for customers and added points of revenue for the company. One of those is insurance on the glass of the car. Glass insurance used to be a standard part of comprehensive insurance with every auto insurance company. It still is for many, but residents of high risk areas often find that their car windows were not insured from street violence or countryside encounters with deer. Other add-on services include roadside assistance and assistance with paying for a rental car under certain circumstances.

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