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All About Car Insurance
You know car insurance is important, as it protects both you and other drivers on the road. In fact, most states require that drivers possess car insurance. Having insurance protects you financially and legally if you are involved in an accident, and covers damages to your vehicle. However, that’s about the extent that most folks know about car insurance, if at all. Whether you’ve just received your license or have been driving for years, it’s crucial to not only know what car insurance is, but as to how it actually works, what is and is not covered, and how to obtain insurance in the first place. Keep reading on to learn all about car insurance.
What is Car Insurance?
Car insurance, also referred to as auto insurance, is an insurance policy for drivers. Car insurance basically protects you financially and legally should you be involved in an auto related incident; it also covers damages to your car.
How Does Car Insurance Work?
Car insurance works in that you pay a certain amount, or premium, to the insurance company, for coverage. As long as your policy is active, your insurance will help you with what is covered in the policy. Depending on your policy, you’ll pay your premium monthly, quarterly, or semi-annually.
How Much is Car Insurance?
Car insurance has no set price, as so many factors---age, gender, vehicle, state, accident history, etc.---determine the cost of premiums. As of a study made in 2020, the “average” cost of car insurance is $119 a month---but that is based on a 40-year driver with a good driving record. Know that this “average” will vary greatly due to the above factors. So, to really know how much car insurance will cost for you: get quotes.
Types of Car Insurance and Riders
There are several types of car insurance policies, to meet the varied needs and situations faced by drivers. What exactly is and is not covered in different policies can vary state to state, but below are the most basic definitions.
If you are the cause of an accident, then you are liable, hence the name of this policy. If, for example, you rear end another vehicle, liability insurance will pay for the expenses for the party not at fault. This type of insurance is mandatory in most states.
What is Comprehensive Car Insurance?
Comprehensive coverage is for instances when a vehicle sustains damage in non-collision events. Examples include hail/ weather damage, hitting a deer, vandalism, theft, etc. This coverage entails paying a deductible, or a set amount out of pocket, before an insurance company reimburses you for a claim that is covered by your policy. Comprehensive is usually an optional coverage, but if you have an auto loan, your bank may require you to obtain this policy.
Also referred to as Med Pay, Medical Payments provides coverage for hospital visits, ambulance rides, surgery, etc., should you and/ your passengers be injured in an accident---regardless of who caused the accident. Note: some states require this coverage, while it is optional in others.
Uninsured and Underinsured Driver
You’re involved in an accident, and while you may have car insurance, the other driver may be not insured, or is underinsured. This policy can help pay for medical bills if you’re injured, and also possibly for vehicle repair (varies state to state). If a person is underinsured, meaning their policy isn’t enough to cover damages, Underinsured Driver policy may help. As with Medical Payments, Uninsured and Underinsured Driver is mandatory in certain states, and optional in others.
You may think this refers to passengers, but riders is a car insurance term that refers to an additional policy or endorsement that provides more protection or features. Riders will vary company to company, but some examples of riders are rental coverage, roadside assistance, and glass coverage. However, be sure to talk to your insurance agent or company to fully understand what riders they carry and what exactly they cover.
Common Insurance Terms
Comprehensive coverage is for non-collision events, whereas collision coverage is for when vehicles sustain damage from another vehicle or object.
In the event of a comprehensive/ collision loss, this is the amount you pay out of pocket, before your insurance company pays the remainder of the bill. The amount will vary depending on what insurance policies you have. The most common deductible is $500, but can range from $100 to $1000.
A professional who works for an insurance agency and sells the company’s insurance products, while making commission. Agents help clients find the right insurance.
Also known as a claims adjuster, an insurance adjuster looks into claims, so they can determine the liability of the insurance company.
The individual who owns the insurance policy; you can also add other people to your policy, such as your spouse or children.
The amount you pay to have insurance coverage, every month or every six months, depending on the company.
How To Get Car Insurance
There are three methods in obtaining car insurance---online, over the phone, or in person with an agent. In this digital age especially, it’s pretty common for folks to shop online for quotes on car insurance. But before you browse online or contact an agent, you will want this crucial information, listed below, at hand to make the process easier.
Check Your State’s Car Insurance Laws
Be sure to familiarize yourself with your state’s car insurance laws, as such laws will vary state to state. It’s important to know that if you’ve moved to a new state, your coverage will not “move” along with you; you most likely will have to switch to new policies. In general, most states will require that drivers carry Liability Insurance. Though you may be tempted to go with the minimal requirements for coverage, this can be risky, for should you be in an accident, expenses may not be fully covered. It is always advisable to have coverage that extends beyond the minimum set by state laws. Note, too, that other types of car insurance, such as Uninsured/ Underinsured Motorist, is mandatory in some states, while in others it is optional. Regardless of the exact laws by state, know that failing to have car insurance as a driver can result in fines, loss of your license, and/ or jail time. Don’t wait till an accident to get car insurance---having it now instead can save you time, money, and legal woes.
The benefit of shopping online for quotes is that you can compare prices, and there is no pressure to make a quick decision. Simply provide your information---age, vehicle make and model, gender, etc.---and you will receive a quote. The downside of buying car insurance online? Quotes are just that: quotes. The numbers you see may not be the amount you’ll pay in reality. Plus, if you have questions, and/ or are new to purchasing car insurance, you’ll most likely benefit from talking over the phone, or in person with an agent.
Over the Phone or In Person
Speaking to an agent over the phone or in person is a great way to answer questions you may have. An agent will help assess options and policies available to you, and can explain more complex aspects about car insurance.
How to Lower Car Insurance
Also mentioned before, car insurance has no set cost, as so many factors come into play: state laws, driver history, agency, broker, etc. There are several ways to lower car insurance premiums, the crucial one being: have a safe driving record. This may seem redundant, but it’s true: avoiding accidents and fines will keep your premiums lower. The more accidents and speeding tickets you have, the higher your premiums will be.
The make and model of your vehicle also affect premium rates as well. Generally speaking, sporty or very pricy cars often have higher premiums. So if you’re in the market for a new vehicle, keep this mind, and know that vehicles with higher safety ratings can help lower premiums.
Less known is that having a good credit score can help lower premiums. When agents and insurance companies see that you are financially responsible, they are more inclined to view you as a responsible driver, and determine lower premium rates. In fact, studies have shown that drivers with higher credit scores have less accidents. Being both financially savvy and a responsible motorist can help you end up saving money.
Lastly, to lower premiums you’ll want to have a higher deductible. When you have a lower deductible, you have higher monthly costs.