If you drive a vehicle you are required by law to have automobile insurance. There are many companies and types of auto insurance available, with an almost endless amount of coverage options. So how do you choose what options and which company to get your insurance from? Let’s check auto insurance terms.
First you need to understand what it is you are buying. Insurance companies are like people who bet on races. They have to look at all the variables involved your situation and try to determine based on driving record; size and type of vehicle, where the vehicle will be driving what the chances are they will have to pay a claim.
Many of these variables change quickly and can have a big influence on insurance companies. Issues like choosing to drive larger more dangerous SUV’s, talking on cell phones, huge jury awards for plaintiffs, uninsured or underinsured motorists have a huge impact on how many claims and how much is paid out in claims by an insurance company. These conditions are all very erratic and thus insurance rates are subject to change frequently and insurance companies are trying to be certain they payout less in claims than they take in from premiums.
Insurance companies take your personal information and using sophisticated equations and some basic statistics- determine rates. They vary by company because companies may cover only a certain group of drivers or they cover more drivers and the rates reflect the expected costs associated with the group of drivers they insure.
Automobile insurance is a necessity. Driving without insurance is not only illegal but states can deny your vehicles registration, driver’s license renewal and if you are in an accident, even if the accident is not your fault, you can be cited.
Types of insurance
Liability Insurance – Liability insurance covers damage to someone else’s property or person in the event you are at fault in an accident. This type of insurance is usually the minimum requirement under the law. Most states have specific minimum requirements. In California the liability coverage must be at least $15,000 for injury/death to one person, $30,000 for injury/death to more than one person, $5,000 for damage to property. In Vermont the amounts are higher - at least $25,000.00 for one person and $50,000.00 for two or more persons killed or injured and $10,000.00 for damages to property in any one accident. These statutes vary from state to state and include fines of up to $250 for people who do not have this type of coverage.
At the barest minimum liability insurance is required. This type of coverage does not cover your vehicle or you in the event of an accident when you are at fault. The cost of liability insurance is directly related to the type of car you drive – (SUV’s are likely to cause more damage than smaller cars), your driving record – including moving violations or other accidents you may have been involved in and where you drive (some areas of the country have higher incidents of accidents)
The other type of insurance is called comprehensive or collision insurance and it covers your car and you in the event of an accident. If you financed your car and are still making payments, most lenders will require that you carry insurance on the vehicle and can also set the deductible amount. The deductible is the amount you pay if your vehicle is in an accident. In other words if you are involved in an accident that is your fault and the car sustains damage estimated at $2,500.00, the deductible you chose was $500 – then you are responsible for paying $500 and the insurance company pays the remainder of the claim. Deductibles are available in various amounts from $100 to $1,000. Obviously the higher the deductible, the less risk the insurance company takes and so the lower the insurance premiums. But a high deductible can hurt if you have to pay it. The best idea is to go for the highest amount you could comfortably come up with in an emergency or usually not more than 1 month’s car payment. If you don’t usually have easy access to $500 to pay a deductible if you are involved an accident; then you should choose a lower deductible.
Often times if you are involved in an accident the insurance company will have preferred repair shops and can arrange payment directly with them. If you are not at fault and the other person’s insurance agrees to that, they may waive the deductible and collect it directly from the other insurance company thus making your claim an easier process where you do not have to pay then money then be reimbursed.
Also, if you use your vehicle for business either as a taxi or in the case of construction, or maintenance people to go from site to site you may need to carry commercial rated insurance depending who is driving and how many people are riding in the car.
In addition to the two main types of coverage there are many different types of additional coverage that can be added to your policy. These include but are not limited to towing and labor, rental car coverage, roadside assistance, personal injury insurance and business auto insurance. This coverage is designed to pay for these expenses in the event of an accident. If you can not live without a car for two weeks while your car is repaired, then rental car coverage could pay to have a car available. Personal injury insurance is designed to cover your medical bills and lost wages, at certain percentages, if you are injured in an accident. However if you already have roadside assistance through Good Sam’s or AAA you may not need to have this coverage on your policy.
Discounts
Make certain you are aware of any discounts the insurance company may offer. There are discounts for good grades requiring a copy of your report card. There are multi-car discounts, low mileage discounts, discounts for anti-theft devices and other safety features like ABS and passive restraint systems like airbags or air curtains. Ask your agent what discounts are available and if you qualify.
Shop around
Shop around for your insurance check out big companies and small ones, make sure that you are comparing apples to apples. In other words make sure the liability coverage is the same and the deductible is the same on the comprehensive coverage and the extra coverage is the same. If you can see a big price advantage in a specific company - check the company out make certain they are reputable and pay their claims in a timely manner. There is nothing worse than paying for insurance and then not have it be there when you need it. Shop around on a regular basis rate can vary up to 300% for similar coverage.
There are many websites that offer competitive car insurance quotes from various companies and allow you to see auto insurance rates from several companies.
If you are involved in an accident and you do not have sufficient coverage, you may be taken to court and have wages garnished or other forms of payment enforcement put on you by the court, so review your coverage and be certain that you are comfortable with your coverage. If you decide to take more risk on yourself and lower the amount the insurance company covers than your premiums will go down, however keep in mind car repairs are expensive and a minor parking lot fender bender can easily cause over $2,500 in damages.
Auto insurance can be complicated and bewildering with so many different auto insurance terms. Make certain that you understand your policy what is covered, what isn’t and ask questions. Your agent should be well equipped to help guide you through the maze of choices available to you. It is a necessity of our modern life and the best we can do is be certain we have sufficient coverage in the event of an accident.
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