Tuesday, September 17, 2019

Getting your car Insurance! How Does Car Insurance Work?

In short, car insurance is an agreement between you and your insurance company. You agree to pay them a fixed and recurring fee, called a premium. You can pay your premium monthly, yearly, or every six months. In exchange for the premium, the car insurance company gives you an auto policy. A car insurance policy is a contract where the insurance company agrees to give you financial coverage for certain types of events. When you have the right car insurance coverage, you won’t have to come up with cash for repairs if you wreck your car. You simply alert your insurance company through a process known as making a claim, and your insurance company pays for repairs or vehicle replacement, up to your coverage limits. Your auto insurance policy will also spell out your deductible, which is the amount of money you are responsible for contributing when you make a claim. So, for example, if your car has $3,000 worth of damage and your deductible is $1,000, you pay $1,000 and your insurance company pays $2,000.

Because insurance companies have many policyholders, and not all of them will make a claim, the insurance company will have enough money on hand to pay for the policyholders who do need to make a claim. Note, however, that exactly how much the company will pay for a claim (the coverage limits) and what types of claims they will pay for, depend on the types and amount of insurance you buy.