Auto Insurance

Along with vehicle registration and a driver’s license, auto insurance is one of the requirements by law needed to operate a passenger vehicle. The minimum amounts of property damage and personal injury liability vary from state to state, but all states require auto insurance in one form or another. And although insurance can be fairly complicated when the details are involved, an explanation of its basic principles is simple.

Essentially, when you purchase auto insurance, you are hedging against any serious financial liability should you be found liable in an auto accident. You purchase what is known as a premium, which can be paid upfront or in installments, and that premium buys you an insurance policy. Basic insurance policies cover only the property damage and personal injury costs you inflict on another party—not your own–while more expensive coverage includes collision, comprehensive and uninsured motorist insurance. Each added coverage adds a level of protection to your insurance. You can also choose to increase your liability limits. A basic limit, for example, would cover $25,000 worth of personal injury for another party, but it can be increased to $50,000 or to as much as you’d like it.

Auto insurance rates are determined by many factors including driving history, age and gender. Insurance is the business of calculating risk, and because, for example, women statistically get into fewer accidents than men, their rates are generally lower. It may seem unfair if you are a man, but the determination of rates involves an ever-changing list of factors and mathematical probabilities. 

What is for certain is that you need to have auto insurance if you are to drive legally. Not only can it protect your vehicle in case of an accident, it can keep you from being financially liable in the event that you are to blame for an accident.