What is Car Insurance and Why is It Important?


Auto insurance (Otherwise known as Vehicle insurance, car insurance or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its main purpose is to provide a means of protection against damages/losses incurred because of traffic-related accidents, as well as indemnity against lawsuits and liabilities which could be incurred in vehicular accidents.

What is covered by Auto Insurance? 

Auto insurance can cover some, if not all of the following: Physical damage on the insured vehicle; Medical payments for the insured party; Third parties like vehicles and people, property damage and bodily injury; Third party, fire and theft; and Personal injury protection, (Also known as No Fault Auto Insurance) which pays for damages sustained by the insured vehicle and its passenger/s regardless of fault.

Various insurance policies explicitly specify the circumstances under which any of these items are covered. For instance, a vehicle can avail of protection from theft, accident damage or fire damage independently, with each case having a separate insurance.

Am I required to get Insurance for my vehicle?

Yes, to some extent. As mandated by law, the minimum requirement is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle. Some countries/states may require some form of liability insurance even before an actual driver’s license can be issued.

Auto insurance covering various liabilities for injuries and/or property damage done to other parties is compulsory in many countries. In the US, each state provides a different set of requirements with regards to auto insurance and its policies. Note that some States may require annual fees for each vehicle which is not insured against liabilities. The Penalties you may incur as a result of not having auto insurance varies from state to state, but these usually involve a substantial fine, if not suspension or outright revocation of your driver’s license. The most extreme of these cases may also include jail time.

Is auto insurance available for everyone?  

Yes. Given that most states and counties require auto insurance for all drivers, risk plans have been provided to assure coverage in the event that an individual is unable to find a willing insurance company. The policies covered by these plans may vary from state to state, but note that these are sure to be expensive, given that bad driving histories are definitely risks for any Auto insurance provider.