What is Auto Insurance - Important Facts Everyone Should Know

By Costas Peppas

Auto insurance is a product that is purchased that can pay for damages to your vehicle or others' vehicles in the event of an auto accident or non-accident related damage. Each state has its own laws regarding the amount of auto insurance that each person should have to be able to drive legally. There are many different factors that influence auto insurance rates, as well. It isn't based on different companies, it is up to the insurance industry to determine what is auto insurance and how much each person will pay for auto coverage.

"What is auto insurance?" seems like a very basic question. However, there are many different facets and elements to consider about auto insurance that it can get complicated very fast, if you're not prepared for what you're getting into. You need to know how rates are calculated, what types of coverage are available, how much coverage you need or can get, and which companies offer the best auto insurance for your needs.

Rates are calculated based on a few factors, including your driving record, age, gender, vehicle type, and credit rating. If you have a good driving record, or a safe vehicle, you will pay lower insurance premiums. Wait. What's a premium, you ask? The premium is the price you pay for insurance, and is usually determined in 6 month or annual amounts, depending on the company and the length you want for your policy. If you are a higher risk to the insurance company, you'll pay higher premiums.

There are many different types of coverage available for your auto insurance needs. Most states require bodily injury liability and property damage liability coverage. Some states require other coverage, such as personal injury protection, medical payments coverage, and uninsured or underinsured motorist coverage. Most of these are self explanatory by name, but can get confusing if you're not really educated on the topic of what is auto insurance.

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