Introduction to Car Insurance
We'll explore the most common types of auto insurance coverage, what they protect, and what situations they apply to. You'll learn what criteria insurance companies use to calculate your premiums each month. We'll also cover money-saving tips to find cheap car insurance rates no matter your age, vehicle, or driving history. Finally, you'll gain insight into how to smoothly handle car accident claims and payouts.
Let's get started unraveling the complex world of auto insurance!
Main Types of Car Insurance Policies and What They Cover
Several types of car insurance coverage cater to different scenarios. The level of protection and additional services offered by providers varies across these policy types:
Liability Insurance
Liability car insurance is mandatory in nearly every state. It covers bodily injury and property damage that you cause to other parties in an auto accident if you're deemed "at-fault".
Bodily Injury Liability covers medical bills and related expenses like lost wages for people injured in the accident.
Property Damage Liability pays to repair or replace another driver's vehicle or other property like buildings and fences damaged by your vehicle.
Liability insurance helps protect your finances if you cause an accident. But it does not pay for injuries to passengers in your car or damage to your own vehicle.
Collision Insurance
Collision insurance covers damage to your vehicle resulting from a crash with another car, object, or as a result of flipping over. This coverage pays for repairs or the total loss value of your automobile if the repairs exceed a percentage of the car's worth.
Collision typically only covers the market value of your car, not the amount you still owe on any auto loan on it. You also must pay a deductible, often $500-$1,000 depending on your policy, before coverage kicks in.
Comprehensive Insurance
Comprehensive protects against vehicle damage caused by events other than collisions, such as:
- Theft or vandalism
- Storm damage including hail or floods
- Fire
- Falling objects like trees or debris
- Animal collisions with large animals like deer
Like collision, you choose a deductible amount before the comprehensive policy pays out to fix or total loss your car. Comprehensive also only covers the depreciated market value of the vehicle.
Uninsured/Under-insured Motorist Insurance
Uninsured motorist coverage protects you if you're in an accident caused by a driver with no liability insurance who cannot cover your losses. This applies your own policy's bodily injury liability and property damage liability coverage amounts to help pay for injuries and vehicle damage the other uninsured driver is responsible for.
Similarly, under-insured motorist coverage kicks in when the at-fault driver's policy doesn't fully cover all your accident-related expenses. This ensures you can get reimbursement up to your policy's liability limits.
Purchasing adequate uninsured and under-insured motorist coverage is wise given that nearly 13% of drivers lack car insurance nationwide. This coverage protects your assets.
Which Car Insurance Types Are Necessary for Me?
Car insurance providers offer bundled packages with different combinations of these major coverage types to cater to diverse consumer needs and budgets. Nearly all states require liability insurance at a minimum. From there you can add collision, comprehensive, and supplemental coverage. Usually full coverage includes:
- Liability
- Comprehensive
- Collision
- Uninsured/Under-insured Motorist
Whereas states like Florida and Michigan with no-fault systems also require PIP. Evaluate which coverage types protect against common risks in your area and for your driving habits. That will help you determine the right insurance package.
Now that you understand the major car insurance coverage categories, let's explore what criteria impact how much you pay for these policies.
What Factors Determine Your Car Insurance Rates?
Insurance companies assess dozens of criteria about drivers and vehicles to determine premium pricing. These are some of the biggest factors that raise or lower your auto policy rates:
- Age
Younger drivers under 25, especially teens, pay the highest car insurance rates. Statistics show drivers aged 16-19 are 3 times more likely to be involved in crashes than older motorists. Rates gradually decrease through the 20s, with drivers seeing significant drops around age 25 assuming a clean driving history.
- Gender
Historically men paid more for car insurance than women by an average of $15-30 per month. This is because data showed male drivers caused more accidents. However, some states have enacted laws prohibiting using gender as an insurance rating factor.
- Marital Status
Married drivers tend to pay less than single drivers. Insurers deem marriage as a sign of stability and therefore married couples present less risk on average. Adding your spouse to your policy can sometimes qualify you for a multi-policy discount too.
- Driving Record
Drivers with moving violations like speeding tickets, DUIs, at-fault accidents, and suspended licenses due to infractions face steep premium hikes. Just one DUI can increase rates by nearly $10,000 over a decade! Minor violations may increase rates for 3 years until vanishing from your motor vehicle record.
- Credit Score
Most insurers factor in your credit-based insurance score, derived from your credit report. Statistically drivers with poor credit tend to file more claims. Boosting your credit score can save hundreds per year.
- Vehicle Type
Insuring sports cars, luxury vehicles, performance cars, and off-roaders costs more due to higher theft risk, repair costs, and crash rates. Family sedans and minivans tend to have the lowest premiums.
- Annual Mileage
Drivers covering over 15,000 miles annually see higher rates due to increased accident likelihood. Low mileage discounts apply for motorists driving 5,000-7,500 miles per year. Tracking mileage with usage-based programs saves over 25%.
- Location/Zip Code
Premiums vary by state and even neighboring zip codes due to accident frequencies, auto theft rates, litigation rates, labor/parts costs, and state insurance minimums. Moving to areas with higher crime and collisions means paying more.
How to Get the Best Car Insurance Rates
While some factors impacting premiums are fixed, such as age, gender and location, there are still numerous ways to save money on car insurance:
Shop Around For Quotes
Compare identical coverage from at least 5 insurers to find the best price. Rates can differ hundreds between companies so this is crucial! You can conveniently compare quotes online through sites like Geico, Progressive and State Farm.
Take Advantage of Discounts
Ask about all possible discounts like:
- Good driver
- Good student grades
- Defensive driving course completion
- Multi-vehicle policies
- Anti-theft devices
- Low mileage driven
- Paid-in-full policies rather than installments
- Group affiliations
The more discounts you quality for, the lower your overall rates will be. Make sure to clearly ask insurance reps what discounts can apply during the quote process.
Drop Unnecessary Coverage
Removing extras like roadside assistance, rental reimbursement, custom parts coverage and MedPay can pare down premiums if cost is an issue. Stick to essentials like bodily injury liability first and foremost if looking to save money.
Raise Deductibles
Selecting higher deductibles lowers monthly payments by 15% or more quite easily. Going from a $500 deductible to $1,000 cuts premiums substantially and makes policies more affordable for those on a budget.
Improve Credit Score
Boosting a marginal credit score up just a few points to above 700 saves thousands over the years by qualifying you for better insurance rates reserved for those with good credit history. Pay down debts and maintain positive payment history.
Consider Usage-Based Insurance
Usage-based programs through insurers like Progressive and State Farm track driving habits through an app or plug-in device to determine personalized rates. Safe driving behaviors like minimal late night trips, steady speeds, and limited mileage can net over 25% discounts for the safest drivers.
Maintain Good Driving Record
Avoid accidents, traffic violations, and claims if possible. Drivers with just one at-fault crash see rates jump nearly 68% on average! Going citation and violation-free for 3-5 years returns premiums to regular levels.
Look For Bundling Discounts
Insure multiple vehicles or policies like homeowners or renters insurance through the same provider to activate multi-policy discounts. Bundling car and homeowners insurance saves roughly 30% for dual coverage rather than separate carriers.
Adjust Coverage As Vehicles Age
Consider dropping collision and comprehensive the older your vehicle gets. The premiums may exceed the actual cash value for cars over 8-10 years old. Liability coverage remains crucial however.
Sticking to these car insurance rate reduction tips year after year keeps costs manageable no matter your age, vehicle type or location!
Filing a Car Insurance Claim
Getting into any motor vehicle accident or incident causing damage to your car can be an extremely stressful and frustrating experience. Knowing exactly what steps to take after a collision helps the claims and reimbursement process go smoothly. Here's what to do after an auto accident:
Call Your Insurance Provider Immediately
Notify your insurance company as soon as possible after an accident, even for minor fender benders. This gets the claims process initiated quickly. Be prepared to provide details like time and location of incident, parties involved, injuries sustained, and extent of vehicle damage.
Obtain a Police Report
Have law enforcement come to the crash scene and file an official report documenting statements from all drivers and passengers, survivor/witness accounts, vehicle damage assessments, and determining fault based on evidence. Police reports support insurance claims.
Take Photos
Use your smartphone to photograph damage to all vehicles, the accident scene, road conditions, and any property damage like fences or buildings impacted. Capturing images provides proof for insurers when determining reimbursements.
Exchange Information
Collect names, contact info, insurance details, driver's license numbers, and license plate numbers for all parties involved. This ensures you can coordinate with adjusters and facilitate payment by the at-fault driver's insurer.
Get Vehicle Appraised
Take your car to an approved repair shop on your insurer's referral list to obtain an appraisal for fixing or total loss costs. Keep all invoices and documentation related to accident repairs, car rentals, medical bills and more.
Submit Claim Paperwork
Finally, compile police reports, photographs, appraisals, and any applicable medical invoices to submit to your adjuster. This evidence supports your claim for compensation including covering repairs, medical expenses, and lost wages per your policy limits and state laws.
Key Takeaways on Selecting Car Insurance
- Compare quotes across insurers for the same coverage levels
- Opt for discounts to lower monthly payments
- Only carry necessary types of insurance you require
- Drive safely and maintain good credit to keep rates affordable
- Document accidents thoroughly and submit organized claims paperwork to simplify getting reimbursements
Purchasing the right auto insurance doesn't need to be so baffling. Equipping yourself with an understanding of policy types, insurer rate setting practices, and premium reduction strategies makes getting coverage far less stressful so you can drive with confidence!
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