Auto Insurance Guide
Sometimes undesirable things happen, and that’s true in every aspect of life. The important thing is to be prepared to deal with the consequences of an unexpected event, and this is especially true for car owners.
Every person who owns a car knows about the risks of it being involved in an accident, even when the car is not in motion.
Accidents that are nobody’s fault, like damage caused by a storm, flooding, a falling tree and many more, usually carry a monetary loss due to car repairing, lost time and impossibility to use the car for business during the time it’s being repaired.
Accidents that are caused by somebody, like a collision with another car, a hit-and-run, damage to property due to mechanical failures and others, are generally more expensive, as they not only signify spending money in repairing the car, but also covering medical costs and often financially compensating the victims.
Auto insurance protects the car owner against financial risks associated with accidents, vandalism, auto theft and even natural disasters. There are various degrees of coverage, and the cost of an insurance policy strongly depends on the benefits of each one of those types of coverage.
Every car buyer is legally required to purchase at least a minimal coverage, and this minimum varies from state to state, depending on local regulations.
Common Types of Auto Insurance
Liability coverage. Liability insurance coverage protects you when you are held responsible of other people’s death, injuries or damage to their properties as a result of an accident that involved your car. Simply put, liability insurance takes care of other people’s losses and compensations instead of you.
The most common types of liability auto insurance are:
- Bodily injury liability coverage: This coverage pays for lost wages, medical bills, rehabilitation, treatment and/or funeral costs for any third party affected by an accident caused by your car. If the third party sues you successfully, this will also cover the pain and suffering damages and compensation.
- Property damage liability coverage: This coverage takes care of the costs associated to repair and replacement of third party vehicles and other property that was damaged as a result of an accident caused by you.
Other coverage. There are other types of auto insurance that will pay for your own costs, rather than protecting you against other people’s losses. These degrees of coverage can cover your costs in the event of accidents, natural events, vandalism, and theft.
These types of auto insurance include:
- Collision coverage: Collision auto insurance pays for the damage suffered by your own car, regardless of who was responsible for the collision. This type of coverage is usually required by lenders on auto loans.
- Personal injury protection: This type of coverage takes care of your medical expenses and a certain amount of damage losses in case you get injured in an accident, regardless of who was responsible for it.
- Comprehensive coverage: Protects you in case of damage or loss caused by a fire, theft, vandalism or natural causes. This type of coverage is also usually required by lenders on auto loans.
- Towing and labor coverage: covers towing and labor charges up to a certain amount in the event your car requires repairing, whether it had been an accident or not.
- Rental reimbursement coverage: Covers the costs of renting a vehicle while yours is being repaired after an accident.
- Auto replacement coverage: This insurance pays you the total value of the car, in case of total loss.
How Much Will Auto Insurance Cover?
When you buy an auto insurance policy, there is a certain amount of money that you will be required to pay out of your own pocket before the actual insurance coverage takes care of the rest. This amount of money is called the “deductible”, and is generally agreed upon buying the policy, although different insurers have different minimum deductibles.
The minimum deductible amount varies according to your “risk assessment” (which is a number that represents your potential risk of suffering or causing an accident).
Your auto insurance will not cover “exclusions” either. Exclusions are specific events or situations in which a policy doesn’t apply. The most obvious example is that insurance does not cover accidents suffered or caused when driving under the influence of alcohol or drugs. Therefore, driving under the effects of these substances is an “exclusion”, and you will have to pay for the damages or losses yourself.
You will also have to pay money out of your own pocket when the total cost of the losses or damages is higher than the amount covered by your auto insurance. In this case, you will need to pay for the difference.
How Can I Reduce My Auto Insurance Premium?
Although most elements influencing your insurance premium cannot be changed at will (i.e. age, state, health status, etc.), there are many others which can be.
As a general rule, the more you are willing to pay out of your pocket when an accident happens, the less costly will be your premium. Therefore, agreeing on a higher insurance deductible will decrease your premium costs.
Older cars are typically less expensive to repair, so it makes sense to eliminate collision, towing labor or comprehensive coverage if you know you can afford to pay for the repairing costs yourself.
Many insurers offer certain discounts or promotional benefits now and then, make sure to ask and take advantage of them. Typically, you will get a discount on a comprehensive coverage premium if you install an alarm or anti theft device, reducing theft risk.
Some car manufacturers build less expensive parts, so choosing a car made by one of them can reduce the possible repair costs, thus lowering your auto insurance premium. Also, some cars are more likely to be stolen than others, thus the premium for an auto insurance that covers theft will be higher; so make sure to consider this when you buy a new car.
Some Final Words
Although price is always a primary concern, it should not be the only factor that you consider when purchasing an auto insurance policy. Some things may be much more important, for instance, if you usually travel between states, a policy that covers you throughout the county will be more convenient than a less expensive but limited one.
Be sure to take all these things into consideration, and you will find the best auto insurance for you.