Car Insurance | Facts Every Car Owner Needs To READ
The importance of getting car insurance is already widely known
Aside from it being mandatory in most states, owners get their cars insured because they know it will somehow protect them.
But the problem is that many don't know that their car insurance benefits largely depend on them and their options.
Like buying an auto, purchasing car insurance is also a significant investment you need to decide on wisely. Else, you could end up paying more than you should without getting the right coverage for your vehicle.
There are several reasons to buy insurance for your vehicle.
But, before you get overwhelmed by them, we've highlighted some important considerations that you need to remember when getting your car insurance.
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How Does Car Insurance Work?
It's essential to know how insurance works to ensure that you're protected every time you're behind the wheel. Your car insurance serves as financial protection if you cause an accident with your car or if it's damaged or stolen. However, it depends on the certain amount of coverage you decided to pay for.
Your insurance will come into effect if needed as long as your policy remains active. When there's an incident, you can redeem your coverage by filing a claim. The insurance company will then pay for the amount of damage you caused or incurred as long as it is covered in your insurance policy.
Types of Car Insurance Coverage
Your policy is determined by several factors, such as the kind of car you drive and what type of insurance you want. But learning the different types of coverage insurance companies offer is the first key to understand an auto insurance policy.
Your state may require some of this coverage, while others may be optional. Thus, you need to know the amount of minimum coverage required in your state. Though, it's worth noting that a state minimum policy may not help you replace your car in some circumstances unless you have comprehensive coverage.
To figure out the best car insurance policy for you, think through the following coverage:
Car Insurance Liability Coverage
If you cause an accident, liability insurance covers bodily injuries and property damages incurred by any driver, passengers, or pedestrians involved.
Since this is a protection against liability for causing harm to third parties or their property, it doesn't pay for injuries or damages you sustain due to the accident.
Car Insurance Collision Coverage
Collision insurance covers the damages to your car in case of an accident or collision with another vehicle, regardless of who is at fault. In most cases, you may be required to have collision coverage if you are leasing or financing your vehicle.
Comprehensive insurance provides an extra level of protection on your vehicle. Besides accidents on the road, some instances may cause damages to your car even when you're not driving it.
It can be vandalism, fire, accidents with animals, unavoidable weather events, or vehicle theft. Such incidents are covered under comprehensive coverage.
Personal Injury Protection (PIP)
Also known as no-fault car insurance, personal injury protection may cover certain medical expenses of you or anyone else covered in your policy.
It can be family members and anyone riding in your vehicle with no car insurance of their own. In some instances, personal injury protection may also cover lost wages.
This is not required or mandatory in every state. Check with local laws regarding your states requirement for PIP coverage.
Medical Payments Coverage
Medical payment coverage is very much the same as personal injury protection. They both cover medical expenses regardless of fault, and as long as an auto accident causes it.
The difference is that medical payments coverage usually doesn't cover as many expenses as personal injury protection.
Uninsured or Underinsured Motorist Coverage
Many drivers go without coverage or only obtain the state's minimum coverage, which is often insufficient to compensate you after an accident. This coverage can protect you against such instances.
If you're involved in an accident with someone who doesn't have any car insurance, uninsured motorist coverage can help pay for car repairs or medical expenses. On the other hand, underinsured motorist coverage covers your expenses when the other driver doesn't have enough coverage.
These are just the common types of protection that car insurance covers. It's vital that you carefully check with your potential insurance provider about your options and your states' coverage requirements. But remember that you can avoid paying out of pocket for repairs or injuries if you have more coverage.
What Affects Car Insurance Rates
Of course, you would not want to worry about thousands of dollars worth of bills after a car accident.
That's why extra coverage for your insurance policy may be worth it. However, insurance with more coverage comes with a cost. You must know how much you can expect to pay for your car insurance.
Every insurance company has its formula for determining the cost of your coverage. But besides the types of coverage, the following are other factors that may affect insurance rates:
Personal information, such as your age, gender, and location, can influence your insurance rate. Compared to older drivers, younger ones often pay more for car insurance because they may have less experience on the road and are more likely to be involved in an accident.
Moreover, your insurance rates may be higher if you live in urban neighborhoods since it is more prone to accidents, theft, and vandalism than rural areas.
Your Type Of Car
The type of car you're driving along with its purchase price, cost of repairs, safety rating, and the likelihood of theft can affect the cost of your insurance.
Certain types of cars, like luxury ones, may cost more to insure because of their value.
But, you may qualify for discounts if your vehicle is new or built-in with security features like anti-brakes or anti-theft devices.
Driving Record or Driving History
If you've been in multiple accidents or have several infractions on your driving record, the cost of your car insurance is likely to be higher than someone with spotless records.
It's because insurance companies may view you as riskier to insure. If you're a new driver and didn't have any insurance before, you can also expect to pay more for your car insurance.
Limits and Deductibles
Every coverage in your insurance policy has its limit, which you may be able to adjust depending on your needs. Because a limit is the maximum amount your policy will pay toward a covered loss, you will likely pay a higher premium if you purchase more coverage.
Deductible, on the other hand, is the amount you agree to pay before your insurance is activated to help pay for a covered loss. Thus, you'll pay less for your policy if you decide to set a higher deductible.
Choosing Your Auto Insurer
Besides considering the types of coverage and the factors that may affect your insurance rates, choosing a good insurance company is also essential.
The following are a few of the qualities you might want to consider when choosing your insurance provider.
Credible Car Insurance Company
You need to ensure that you're working with a credible insurance company that offers reasonable coverage for the prices they charge.
Several small insurance companies may offer you low rates because of their lower overhead costs. However, they can sometimes be uncooperative when there's an accident, and you file a claim.
Another essential quality of the insurance company is its financial strength. You would not want to learn later that your insurance provider won't be able to pay your claim due to its poor financial results. Fortunately, there are independent rating agencies that assess the financial strength of insurers.
It wouldn't hurt to always do a background check before you commit to any insurance provider. You can also try to find a reliable local car insurance agent in your area to assist you in getting your car insured.
What Insurance Should You Get?
As you might already have figured out, getting the right type of car insurance depends on many factors. First, you would have to know the minimum insurance required in your state. Although you might be encouraged to get more than required, you would need to determine how much insurance you can afford.
Remember that the amount of coverage you need also depends on the type of vehicle you own, driving record, and many others. Thus, you don't need to overdo your insurance policy.
Although it would help to consult with a local car insurance broker, the decision is still up to you. You can get the car insurance that makes you feel most confident in the event of an accident, but at the same time, you're most comfortable paying for it.
Many people add their motorhome or trailer into their car insurance policy. But while your car insurance coverage extends to your RV, it is only applicable to liability coverages. It means that you are covered for any damage the RV may cause to the other party involved. The damage your RV has incurred will not usually be paid for by the insurance company.
If you have an RV or you're planning to buy one through motorhome financing, it would be better if you also acquire RV Insurance for better protection. Like car insurance, it also covers many similar risks, such as collision, liability, and comprehensive coverage.
Car insurance would be worth the expense. However, you might need to make some deliberate effort to come up with the best decision for your needs. After all, it's your hard-earned money that you would be paying for your insurance coverage. Just remember to go for something that you need, and which you can comfortably afford.
Lauren Cordell is a financial advisor who passionately works with clients in need of assistance to manage their personal and business finances. As a blogger, she loves to educate her readers about the importance of financial literacy and planning. When she's not spending time helping her clients, she reads a book or paints at home.