Driving Without Auto Insurance Is Not Only Risky

Category: Finance, Insurance.

Auto insurance is a contractual agreement between you and your insurance company.

In exchange for the premium, the insurance company agrees to pay for certain types of financial losses when you are involved in an auto accident while driving your car. To acquire an insurance policy, you must pay what is called a yearly" premium" to your insurance company. These financial losses include items such as property damage, and legal fees, medical coverage. It is against the law. Driving without auto insurance is not only risky. If you are caught driving without auto insurance, you may have your license suspended, face severe fines, or- in the case of an auto accident, you can potentially go to jail if your car is not properly insured at the time of the accident. Auto insurance is a" cost of driving" that simply cannot be avoided.

Car insurance is a necessary evil, and although we may get frustrated with having to pay for it, the fact is we need it. The absolute minimum auto insurance coverage you are required to carry varies from state to state. This insurance covers bodily injury and property damage. This minimum coverage is generally referred to as" liability insurance" . When quoting or discussing liability insurance, there are three numbers that are used to describe the policy limits. For example, a 15/ 50/ 20 liability policy is defined as: fifteen thousand for personal medical liability per person, fifty thousand maximum medical liability coverage, and twenty thousand maximum property damage liability.

The first number refers to bodily injury limits, the second refers to total medical liability coverage, and the third number refers to property damage limits. Bodily Injury Liability covers injuries that occur to you or any other person involved in an accident when it has been determined that you are the" at fault" driver. Property Damage Liability covers the cost of damage you cause( or a person driving your car with your permission) to someone else s property in an accident when it has been determined that you are the" at fault" driver. Typically, this also covers you while you are driving another person s car( with their permission of course) or when someone else is driving your car( with your permission) . This refers to damage caused directly to someone else s car and also covers damage to city property( light posts, fences, telephone poles, etc) and other structures such as houses, etc, apartment buildings. It is highly recommended that you purchase a liability limit that is much higher than the state minimum in case a third party sues you for amounts above and beyond your insurance policy s maximum coverage. The minimum liability limits set by your state are low.

Although purchasing your state s minimum liability insurance allows you to legally register and operate your car, it is recommended that you acquire at least five times the minimum liability limits set by your state. Depending on your total assets, you may wish to purchase even higher liability limits. This helps protect your assets such as your personal savings, your personal property, your home equity, etc. You should check with a licensed insurance agent to determine the proper liability limits for your insurance policy. Liability insurance can be costly for young drivers or for drivers with a poor driving record( accidents, etc, speeding tickets. ) When acquiring insurance for a teenage driver or for someone with a poor driving record, you should check with your state s Department of Insurance. He or she can help you determine limits based on your assets and lifestyle. They might have programs to help drivers purchase liability insurance at a discounted rate.

For example, at the time of this writing, the State of California s Department of Insurance has a low- income, liability insurance program that can be purchased for approximately$ 400 per year.