General auto insurance alternatives, the good, the bad and the ugly

Car insurance is for many people a terra incognita, unknown territory, only explored if completely necessary. It is true Auto Insurance is plagued with complicated terms, jargon used to explain concepts and ideas we are not used to dealing with in the “real” world. Unfortunately we cannot hide behind ignorance and expect others to bail us out. If you do trust blindly in others with vested interests in how and how much of your money you use, prepare yourself to spend over and above what you should and still not have the car insurance you need.

This article has the lofty aim of explaining the basics. We shall do this by answering basic questions you might have asked yourself.

- Why do I need auto insurance?

Most countries and states require car insurance. This insurance guarantees you can pay the damage you or your vehicle causes to a certain minimum level. This makes sure if you were to be involved in an accident you are responsible for you will have an insurance to pay the expenses.

- What happens if I am responsible for an accident and I don’t have insurance?

It depends in the country or state. In some country not having car insurance and being involved in an accident is a felony and lead to prison. In other states you can “simply” contract the services of a lawyer that will represent you in court. If you are declared innocent you will still have to pay your legal expenses. If you are found guilty you will have to pay the compensation the judge sees fit. If the accident caused personal damages the bill could soar into the hundreds of thousands just in medical bills.

Most countries and states enforce a financial responsibility law. This law requires all those involved in an accident prove they have the means of paying for the damages caused. If you don’t prove you have the ability to pay for the potential damages your driving license will be removed along with your number plate and car registration.

- My policy has a limit of 200,000 dollars, what does this mean?

The name is pretty descriptive, the car insurance company will cover expenses, whether medical, legal or otherwise up to and only up to the policy limit. As you will have gathered this figure is very important in deciding what kind of insurance to choose. An insurance with cheap payments and nice extras can be next to useless if the policy limit is low.

There is a possibility that if you sue your insurance company in certain circumstances they could be required to pay for more than the policy limit.

As I’m sure you have seen yourself understanding the answer to these and many other questions could be the difference between financial stability or disaster.