What Is Auto Insurance?

Auto insurance is just like any other type of insurance. It protects you in the event of an accident. You pay a yearly fee, called a premium, and the insurance company then provides you coverage. This coverage will protect you from financial loss caused by accidents, up to a maximum amount as determined by your policy. In most provinces and states, you are required by law to at least have a minimum amount of liability insurance. Liability insurance covers other drivers and parties from injuries, medical expenses and property damage when you are at fault for an accident. If you cause an accident the insurance company will cover the medical expenses and property damage of other parties up to the limit outlined in your policy. You must have a minimum amount of liability insurance, as decided by you province/state, but you can increase this amount. You can have other forms of insurance as well such as comprehensive insurance which covers theft, and weather damage to your car, and collision coverage, which covers repairs to your car if you are at fault for the accident. Comprehensive and collision coverage’s are optional however, and getting them will raise you insurance premium.

Why Do We Need Auto Insurance?

Now that we know that liability insurance protects us and pays for damages to other parties in the case of at fault accidents, it is easier to answer the question of why we need insurance and why insurance is mandatory. Car accidents are major events, and can cause significant injuries and damages. Without insurance you would be fully responsible and held accountable for these injuries and damages. You would have to pay for the medical expenses of other parties, and the damage to their property (usually their car). This could end up costing several thousand dollars, even as high as several hundred thousand dollars! Not many of us would be able to pay these amounts, and we would end up having our wages garnished and having to pay these bills off for many years. Auto insurance protects us from this situation. For the yearly fee, which is much, much smaller then the price the accident would cost us, we are covered and protected from this from happening. By making insurance mandatory it protects drivers everywhere.

With this being said, the minimum amounts of liability that are mandatory are very small. In most cases they would not cover all the expenses of a major accident. If the expenses of an accident exceed your amount of liability coverage, you are still on the hook for the remaining balance. Therefore it is very wise to increase this minimum amount of liability insurance to fully protect yourself. This will end up increasing your premium, but this small increase is worth not having to pay tens of thousands of dollars in expenses in the case of a major accident.

So, auto insurance is present to protect us from ourselves and everyone else on the road!

For more information visit Auto Insurance Knowledge