Auto Insurance: What is it?

Auto Insurance: What is it?

Auto insurance is a policy purchased from an auto insurance company by the owner of a vehicle to help alleviate the costs that occur in the event of an accident. This type of insurance is particularly useful in places such as California, a state with millions of cars on the road. Whenever you drive a vehicle in California you must have some form of auto insurance. Being it is such an integral part of the daily life of Californians, here are a few key pointers to help clarify what exactly an auto policy contains:

  1. Bodily Injury and Property Damage Liability (BIPD)
  2. Medical Payments for you and others injured within your vehicle
  3. Uninsured Motorist in the event you are injured by someone with no auto insurance

These three coverages are the foundation of any auto insurance policy and have limits per coverage. For example, if the Liability coverage for Bodily Injury was $25,000 per person or $50,000 per occurrence and $15,000 for Property Damage, everything up to those limits will be covered by the insurance company, but anything that exceeds these bounds will not be covered by the policy. *

There are other coverages that are optional within an auto insurance policy that, while not mandatory, if you own your car outright can drastically help decrease the out of pocket cost it takes to repair a damaged vehicle. These coverages include:

  1. Comprehensive which covers a field of events such as theft, vandalism, and fire damage
  2. Collision which covers repair costs for the damaged vehicle
  3. Rental Car and Towing
  4. Gap Coverage which covers the difference between the market value of a new car and the amount you owe on it

All of these coverages can be part of an auto policy that is purchased by drivers in California by what is known as a premium. The price of a premium can vary widely depending on many factors such as years of driving experience, gender, the type of the vehicle, and your driving record.

Another element that affects the price of a premium is your deductible, which only concerns the Comprehensive and Collision part of a policy. A deductible is the amount that the policy holder contributes alongside the insurer to cover the repair costs for a damaged vehicle. A lower deductible ($250) will yield a more expensive premium, while having a higher deductible ($1000) will yield a less expensive premium. If you have any questions about your policy, please contact your personal lines agent at Hardy Insurance.


*The actual coverage rates can vary with higher coverage amounts available.