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Course: Financial Literacy > Unit 6
Lesson 7: Car insurance options and costCar insurance basics
Car insurance has different types of coverage, like liability for when you accidentally hurt someone or damage their property, collision to fix your car after an accident, and comprehensive for other damage like theft or weather. There's also uninsured motorist coverage if someone without insurance hits you, and medical payments to help with medical costs after an accident. Created by Sal Khan.
Want to join the conversation?
- Where the best car insurance company’s??(3 votes)
- SOME popular choices for car insurance are: Statefarm, Geico, USAA, Progressive, and Allstate.
However, car insurance companies have many different plans to suit all people. The best car insurance company, or any insurance company for that matter, depends on the car, how much they want to pay, sometimes where they live, and many other factors. If you want, you can see for yourself which one suits you or your parents best by just looking at some car insurance companies that their multiple plans.(6 votes)
- Does car insurance only cover accidents and the aftermath/ legal costs of cars, or does it also cover, for example, the replacement of a car battery for an old vehicle due for a battery replacement?(3 votes)
- No. Car insurance wouldn't replace your old battery, tires or other stuff that wears out.(1 vote)
Video transcript
- So cars are something
that usually involves some type of insurance. One cars are a pretty expensive
asset that many of us own. The other issue is cars are
driving around pretty fast and they can actually cause
a lot of damage to property or to people. And so the first thing to think about of any type of insurance
is what's the premium? What do you pay for that insurance? And then what's the deductible? Remember, in other videos we
talk about that deductible. If you have a $5,000 deductible that means you have to spend
the first $5,000 yourself. People will often say that's out of pocket and then the insurance kicks in. Usually the higher the deductible for a given amount of coverage or depending on the different
dimensions of coverage, the lower the premium's going to be because the insurance company feels like, well, yeah it's gonna be less likely that we're going to have
to pay for something. But then above and beyond
premiums and deductibles there's a lot of different dimensions of automobile insurance. The first dimension is that of liability. And liability really matters because a car might cost
tens of thousands of dollars but if heaven forbid you
were to run into someone or cause damage to someone else, especially if they could
get really hurt or worse you could be liable for hundreds
of thousands of dollars. So it could be much more
expensive than the car itself. And many states actually require you to actually have liability insurance, even if you aren't required, I highly recommend that you
have liability insurance and no matter how carefully you drive and I do recommend you drive
carefully, accidents do happen. People clearly get hurt on the road, and if someone were to sue you and you were to lose a lawsuit that would cost a lot of money. And even if you don't lose the lawsuit the legal expenses can be a lot. So having liability
insurance can help out there. Now, beyond liability, obviously, what most people think of when
they think of car insurance is your car gets into an accident, there is some damage involved, how do you repair that damage? So that is collision insurance and many car insurances, they'll say, "Okay, we're gonna cover
liability for this much. We're gonna cover collision for this much. And that's pure if you get in an accident, you are covered for that." Now, sometimes there's
another little piece called uninsured insurance, or if someone is underinsured or uninsured and your car gets damaged, well then, and really they were at fault. Some states don't try
to say who is at fault and different people's
insurance just covered their own stuff. But in other states they
say, "Okay, who is at fault?" If let's say I get into
a car accident with you, and if I was at fault, if they
decide that I was at fault, then my insurance would have to cover not just the damage to my
car, but to your car as well. But then if I wasn't insured, then you would have a situation where you have the underinsured
or uninsured policy where if you get into
an accident with someone who's not insured, even
if they were in fault that it will still cover it. So you have the liability,
you have the collision. If you actually get into an accident and there's damage, we could talk about if it covers the uninsured or
underinsured side of things. But then what if a situation where you didn't get into a car accident, a tree falls on your car
or hail damages your car, or someone steals your car? Well, that's comprehensive coverage. So collision is an accident. Comprehensive covers all
of these other things. It is literally comprehensive. And then the last dimension
is medical expenses. Obviously, none of us want to fall into
one of these situations, but if you get into a car accident, it's not just your car
that might get damaged, you or other occupants in your car or someone else's car
might get hurt as well. And as you know, medical
expenses, or maybe you don't know, medical expenses could easily be tens of thousands of dollars. It could be more costly than
the value of the car itself. So once again, that's
another piece of insurance. So when you get into a policy
look at what you're paying, look at the premium and
look at the deductible, but not all insurances are equivalent. Obviously, you have different deductibles but they all have different amounts. Some you should see whether
your policy even covers, liability versus collision
versus comprehensive versus medical expenses. What are the different deductibles? Do they have limits under those? Do they have certain restrictions
where it might not apply? Does it apply if only you're the driver or someone else is the driver? So these are all the details that it's really good
for you to know about when you're making insurance
purchasing decisions.