The primary benefit of car insurance is the financial peace of mind you gain from coverage. The specific benefits you receive vary based on the types of coverage you obtain. Common examples include legal protection, insulation from huge expenses and preservation of vehicle value.
There are three basic categories of auto insurance: liability, collision and comprehensive. The first major benefit of obtaining liability protection is that in all states but New Hampshire, you must meet your minimum legal requirement, according to the Insurance Information Institute. Each state has different guidelines on how much coverage to carry, but having drivers carry liability benefits insures that motorists are financially equipped to pay for third-party injury or damage obligations. Insure.com also points out that this basic coverage means drivers meet their social responsibility of protecting the interests of others while driving.
Insulation from Huge Expenses
Collision and comprehensive coverages pay for damages incurred by your car in a single-car or multi-car accident. For most types of driving accidents, your collision benefits cover the costs. Comprehensive insurance pays for such damaging events as natural disasters, animal impact and vandalism.
Some people don't buy these non-required insurances for less expensive vehicles. However, you could suffer a major financial hit if you don't carry protection on a higher-value car. Assume you owe $20,000 on a vehicle that you bought for $30,000. If you total your car and have no insurance, you owe your lender the remaining $20,000 and get no insurance benefits. In contrast, someone with full coverage normally receives a payment based on the car's value on a total loss, less any deductibles. These are very different financial realities for drivers.
Personal injury protection and uninsured/underinsured motorist protection are two additional components often included in a full-coverage auto insurance plan, though some plans don't offer PIP, according to 21st Century Insurance. These additional areas of protection extend your financial benefits. PIP pays for medical bills incurred by you and any passengers. Uninsured/underinsured coverage protects you when other drivers don't meet their own legal obligations to carry liability insurance.
Preservation of Vehicle Value
With car insurance, drivers can also more easily maintain their vehicles for durability and resale value. Someone without insurance might avoid getting costly repairs done that guard against more extensive problems later on. Proper upkeep on the car helps preserve its value, meaning you more likely get good money for it at trade-in or on a private sale. A significant loss of equity from repair avoidance may negate much or all of the premium savings from not having insurance.
Another benefit of full coverage auto insurance is that it often comes with extra perks, such as 24-hour roadside assistance, flexible payment plans and accident forgiveness.