Accidents are inevitable, hence ensuring the security of your life, property, and liabilities, preparing for the worst possible scenario, is the safest and most credible option at hand. Hence, that’s what Auto Insurances do; keep our lives, properties, and liabilities safe and sound.
WHAT IS CAR INSURANCE?
Car Insurance – also referred to as auto insurance, motor insurance, or vehicle insurance – is a contract that you sign with an insurance company that assures the fulfillment of your financial expenses resulting from incidents in exchange for premiums payable on a weekly, monthly, or yearly basis.
Your auto insurance will generally cover;
- Property (Vehicle or other property damage)
- Liability (Your legal responsibilities from incidents)
- Medical (Physical injuries, treatments, or funeral costs)
Simply put, instead of you paying out of pocket in an accident right away, the insurance company will pay all the expenses associated with the auto accident in case of an emergency while you continue to pay your premiums.
CAR INSURANCE COSTS
Car insurances are concerned with two types of costs; premium and deductibles.
Premiums are monthly or annual installments of the insurance policy you’ve purchased. In other words, it is the cost of your insurance that requires payment on a monthly, bi-annually, or annual basis.
As a general rule, deductibles are inversely proportional to your premiums. Do you know why?
Deductible is a specific amount that you will pay (the policyholder) before your insurance company can pay any expenses of claims in your insurance coverage. So, if you have a higher deductible you will have to pay low premiums since most of the cost in the insurance coverage will be paid by you. It’s like you shared the cost of your insurance with your policy provider.
TYPES OF INSURANCE COVERAGES
Auto insurance coverages are priced individually based on your own customization, purposes, and needs. They are generally issued for a timescale of six-months to one-year, which is renewable as well. Also, specific terms and conditions for insurance policies vary with different plans and regions.
Understanding insurance coverages is essential to opt and mold the right insurance policy at the best rates.
- LIABILITY COVERAGE
Mostly, Liability Coverage is considered compulsory by laws in several states. So, it’s important to learn what it is and how it is beneficial.
Liability Insurance pays for expenses of accidents caused by your blunder (up to the cost limit), where you are held accountable for the damage or injuries occurred. Although, keep in mind that your liability coverage won’t pay for your own vehicle repairs, medical expenses, or property damages. For that, you’ll need other insurance coverages.
Liability insurance is generally offered in two categories;
Liability of Bodily Injuries (BI Coverage)
This coverage pays the cost of bodily injuries caused by an accident for which you are held liable.
More simply, if an accident occurred due to your fault, your BI coverage will pay for the treatment/medical expenses of the physical harm caused to people involved.
Liability of Property Damage (PD Coverage)
This coverage will pay for any damage or loss (all the bills associated with it) to someone else’s property for which you are responsible. For example; vehicle repair. Your coverage will also pay for legal matters like court fees or defense if you’re sued. - COLLISION COVERAGE
If your vehicle is damaged in case of collision, this coverage will pay the expenses for its repair. The collision coverage not only includes a car owned by you, but also a substitute car or any other that you’re using but isn’t owned by you or your family.
It will pay for the damages when an accident involves only your car or another vehicle as well. Also, if your car collides with an object or any road obstructions.
However, damage from natural disasters, theft, falling or flying objects, animals, and vandalism will not be covered in your collision coverage. - COMPREHENSIVE COVERAGE
Comprehensive coverage will pay to repair or replace your vehicle if it’s damaged from incidents other than collision. It includes damage caused by:- Vandalism
- Natural
- Disasters
- Fire
- Theft
- Falling Objects
- Animals
- UNINSURED OR UNDERINSURED MOTORIST COVERAGE
Uninsured or underinsured motorist coverage is very effective and should definitely be a part of your auto insurance policy.
This insurance coverage will help to cover your expenses in case of an accident when the driver who has caused damage to you and/or your property doesn’t have any liability coverage. It will pay for your medical expenses and vehicle damage in general. - MEDICAL PAYMENTS COVERAGE
Your medical insurance coverage will pay for all the health or funeral expenses of the policy holder, car passengers, or members of his/her family if they get hurt by an auto accident.
For your personal medical expenses, you can opt for a Personal Injury Protection (PIP) coverage or No-fault Payments. - GAP INSURANCE
Collision or comprehensive coverage only pays the current market value of your car, which is lower than you actually paid since a vehicle’s value depreciates overtime. Hence in case of an accident, your gap insurance will cover the ‘gap’ between what you owe on your car and what your insurance coverage will pay for it.
FACTORS AFFECTING INSURANCE RATES
It’s imperative to learn about different coverages and factors like deductibles and discounts since they affect your insurance rates influencing your expectations all along.
Driving History
The rates of your auto insurance will certainly be higher if you are a person with speeding tickets or a reckless driving history. So, drive safely for a fool-proof driving record and can acquire insurance at the lowest rates possible.
Apart from your driving history, your daily car usage also affects the insurance costs. If you barely drive your car like a few miles a week, then you’ll pay a relatively low amount for your insurance.
Vehicle
Your vehicle’s safety rating and size determine your insurance costs at large. Vehicles with bigger sizes, like SUVs and trucks, keep their occupants safer. In fact, most compact cars or sedans have powerful bodies with higher safety ratings. Hence, your insurance company will cost you as per your vehicle type and model. Also, if you have security devices pre-installed in your car, it will eventually lower your insurance company’s expenses by keeping your car safe.
And once you have insured your car, never report an inaccurate mileage as it will reveal eventually once you file a claim due to an accident. These minor mistakes can result in loss of policy or high rates. And, don’t forget to mention you use your car for business purposes. If an accident occurs during your business affairs, you can lose your policy.
Personal Information
Your place of residence, age, gender, and marital status will also influence your insurance rates in various ways. Apart from your country, which will generally have different laws of insurance policies, the area/city you live in also decides how high or low your insurance cost will be as some areas require more car usage than others (like traffic, distance among utilities). Likewise, if you’re young, you can be a careless driver, and if you’re married, you’ll opt for different coverages.
And make sure you mention all the drivers of your vehicle in the insurance to avoid policy cancellation, as the premiums might go up if you forget to mention all the people who drive (use) your car. Also, if there are multiple owners of your car, list them all to ensure their coverage in case of an accident.
Policy Choices
Besides liability coverage, which is compulsory in most states, the rest of the policies are up to your choice. However, your coverage choices will decide how much you’ll pay for your insurance altogether.
Discounts
Many insurance companies offer discounts based on your driving history or driving behavior. Make sure you ask your policy providers if they offer any specific discounts to avail them right away.
After educating yourself on auto insurance and selecting the right coverages at the best rates, ensure that you have updated your policy information with time if any changes have occurred in your life which require to be known by your policy providers. Otherwise, you’ll probably miss out on some discounts or end up bearing higher premium rates.