Auto insurance is a legal contract between you and an insurance company that guard you financially in case of an accident or mishap. Auto insurance offers coverage for: Property Damage including damage to or theft from your vehicle. Personal Injury protection, which pays for the medical expenses resulting from auto accidents, legal expenses due to injuries sustained in an accident, lost wages or funeral costs if death is the result of the accident. Most states require drivers to carry minimum liability auto insurance.
If you have an outstanding loan or balance owing on your vehicle, the lender may require you to carry car insurance. If the vehicle is financed through a dealership, the finance company will require that you carry full vehicle coverage or at least the same level of coverage as that offered by the dealer. This level of coverage will include the repairs to the vehicle, the cost of the tow and towing services if needed, towing and storage of the vehicle, and the value of the car if it is totaled. The car insurance policy will also pay for your replacement car if you are unable to drive it due to injuries, illness, or other unforeseen reasons. You may be required to pay a deductible for any injuries or damage that occurs to you or your vehicle.
Another reason that your lender may require you to carry auto insurance could be if you have another vehicle that is financed through the same bank or credit union that you are financing your vehicle with. In many cases, lenders or credit unions will require that you carry liability and bodily injury coverage. This portion of the policy will cover the other driver or their passengers in case of an accident, regardless of who was at fault. This portion will also cover damages to your vehicle in the case that you are not able to drive it due to a medical condition or other unavoidable circumstances.
If you owe money on a vehicle that you are driving, your lender may require that you carry auto insurance to protect you from the possibility that you will default on your payments. When you have outstanding loans that are being held in collections, the loss of the vehicle you are driving can mean a lot to you or your family. Instead of having to worry about losing your car and all of the medical bills that go along with it, a good auto insurance policy will help you keep your finances in order.
Another reason that your lender or auto insurance company may require that you carry automobile coverage is because of the possibility that you will be sued in the event that you cause damage to another person’s vehicle. A liability policy covers the damages that you cause to others. It is important to note that this type of coverage does not provide coverage for the damages caused to your vehicle in an accident. A bodily injury policy will provide coverage for both the injuries to you and other persons that you injure in an accident. Damage to the insured’s car can also be covered under a bodily injury policy. This type of policy is very similar to a liability policy, but it provides additional protection for the insured in the case that he or she causes damage to another person’s vehicle or body.
The final reason that your lender or auto insurance company may require you to carry automobile coverage is the likelihood that you will be the victim in an accident that involved an uninsured motorist. In many states, this type of insurance protects drivers who are operating vehicles without adequate coverage or who fail to stop at the scene of an accident when they are involved in a traffic accident. Uninsured motorist coverage reimburses you for the medical expenses and repair costs associated with being hit-and-run. You should make sure that your personal details, including your name, telephone number and address, are properly indicated on the policy. If you do not remember to make these adjustments, you may find that you end up paying for damages that were not your fault.