What is Insurance Coverage?
<lingo>Insurance is coverage provided by an organization that protects the insured from covered losses. This protection is provided in exchange for a payment or “premium”. Various forms of car insurance may cover expenses related to injuries sustained in a crash, damage to vehicles or property involved in an accident. Car insurance coverage can even be purchased to cover other related expenses like the costs of a rental car while the insured's vehicle is being repaired. Every state has a minimum amount of liability insurance that drivers must carry to drive legally. </lingo>
Insurance Coverage Clearly and Briefly Explained
Insurance seeks to spread the risks of certain calamities over a large group of people. To spread the risks, individual payments are pooled to cover those who experience a loss. Insurance providers will look at a variety of factors in determining how much an individual should have to pay for coverage. For car insurance, these factors include the make, model and year of the vehicle, age and driving record of the driver, where the car is located and more. Rates will also be impacted by coverage limits and how much risk the insured is willing to absorb.
<twitter>By increasing this risk and taking on a larger deductible, car insurance rates can be reduced.</twitter>
By increasing this risk and taking on a larger deductible, car insurance rates can be reduced. For example, premiums for a policy with a $250 deductible will be higher than those for a similar policy with a $1000 deductible. Every state has forms of financial responsibility laws that require car insurance. These regulations provide for minimum levels of liability coverage that drivers must obtain to operate a vehicle legally in that state.
It should be noted that while minimum coverage may allow drivers to be "legal", state-required minimums may fall short of being adequate to fully cover the insured financially. Different states have various laws requiring proof of insurance either when applying for a drivers license or license plates. Others send out random notices requiring proof of insurance. Drivers are generally required to also show proof of insurance when stopped for a traffic violation.