Almost every state has laws stating that people have auto insurance, but the actual regulations regarding auto insurance vary from state to state - so the type of coverage that you require depends on the state in which you live in.

Even if there are no laws, it is highly recommended that you have some form of cover; otherwise you may end up paying out huge amounts of money in the event of an accident, or even losing your home, in a worst-case scenario.

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Do You Understand How Your Auto Insurance Works?

Most of us in Washington have a lot of questions when it comes to how our auto insurance works. Do we have enough? Too much? Do we have the right deductible? There is the information in the policy, however, much of it can be confusing.

There are ways to help you understand your insurance more easily. One way is to discuss it thoroughly with your insurance company or agent, preferably your agent.

In every insurance policy there are pages that outline what your coverage is by listing each item and writing a paragraph about what it is. All of these tell you what is covered for the premiums you are paying.

Policy Declarations
This part of your policy is unique to you; it contains the personal facts for drivers in your household such as name and address, make and model of your vehicle(s), vehicle identification number(s), policy number and policy duration; plus the basic type of coverage you purchased and your policy limits and deductibles. Check carefully to be certain that your information is accurate. If it is not, your claim may be denied.

Car Insurance Policy Coverage Parts/Insuring Agreement
This section outlines the coverage options and coverage limits that you purchased, such as liability, medical, collision and comprehensive. This section basically outlines what your insurance company promises to provide in return for your payment, based on the coverages and coverage limits you selected.

Car Insurance Policy Exclusions
Exclusions simply detail what is not covered by highlighting your policy's limitations. Combined with the section above, this will make it clear so that you know exactly what will be covered when you make a claim. It also shows you some possible deficiencies that you might want to correct down the line.

Car Insurance Policy Conditions
This is where the legal responsibilities of both the insured (you) and the insurance company are listed, including premium payment obligations, steps to filing a claim, and procedures for resolving disagreements.

Car Insurance Policy Definitions
This section defines terms and outlines your rights and the rights of the insurance company. This section is often referred to as the "fine print."

Car Insurance Policy Collision Coverage
This covers loss to your own auto caused by its collision with another vehicle or object. If you cause an accident, collision coverage will pay to repair your vehicle, and is normally the most expensive part of a car insurance policy. You must choose a deductible, which is the amount you, the insured, must pay before the insurance company pays the remainder of each covered loss. The higher the deductible, the lower the premium costs.

Make sure you think carefully when you are choosing a deductible because this is the amount that you have to pay before your car can be fixed. Usually the car repair shop wants the money in advance.

Car Insurance Policy Comprehensive Coverage
Comprehensive coverage covers damage to your vehicle caused by an event such as fire, theft, vandalism, and falling objects. This also comes with a deductible you select, which is how much you will pay before the insurance company pays the remainder.

Car Insurance Policy Liability
This is the most important part of your policy which you should pay close attention to. You must have liability coverage according to the law..

The liability part of the insurance contract which pays if you are at fault in an accident, liability insurance will pay to cover injuries and property damage costs caused to others in the accident (including your legal defense costs, if applicable).

Bodily Injury Coverage
Bodily injury coverage pays for things like medical costs and lost salary to others, while property damage pays for repairs to other people's property you damaged in the accident (other than your own car). Liability coverage (which is the state mandated part of your policy) is the basic building block of any auto policy, and minimum liability limits vary from state to state.

It can be a lot to understand but if you take the time to know what you are covered for and what you are not covered for so that in the event that anything unexpected happens you are prepared.

Car Insurance Q & A

Question: If someone borrows my car and crashes it, does my insurance apply, or does theirs?
Answer: Generally speaking, the liability follows the car, so your insurance would apply, as it is your car. The liability insurance of the driver often pays the additional amount if the costs payable are above your policy limits.

Question: If a child goes to college with mom or dad’s car, are they covered under the parents’ personal auto policy?
Answer: This can vary from company to company. Check with the insurance provider and make sure that the child is listed as an additional driver. Do this before the child goes to college, and it will avoid unnecessary disputes later on.

Question: Do I need ‘gap’ insurance?
Answer: If your vehicle is on finance, and its value is now less than the amount you owe, then yes you need gap insurance. If you owe less than its value, then no, you do not need gap insurance.