The Complete Beginner’s Guide to Car Insurance
Before you buy auto insurance online or call a broker, you should take time to understand what you’re paying for. Knowing the basics about car insurance will help you to spot a good deal and avoid unwanted surprises. Although insurance can be complicated, mastering the basics will give you an advantage.
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You might think that the first step in getting a good auto insurance quote is to start calling various brokers and compare their offers. But there’s an important step that comes before the phone calls, before the Google search for agents, and that’s understanding how car insurance works in the first place.
Auto insurance can be a complicated topic. Fortunately, just knowing some basics will probably give you a big advantage in selecting a coverage plan. This can result in better protection for your vehicles, and/or could save you hundreds of dollars every year – money that could go toward a family getaway, or a romantic weekend for two, or some extra Christmas presents at the end of the year.
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So, time spent learning these basics is time well spent!
Considering Different Coverage Options
The first thing about car insurance to remember is that an insurance policy contains multiple different coverages. Furthermore, each coverage could be applicable to a specific situation.
For example, state law requires all drivers to carry liability insurance. This pays for injuries and damages you’re responsible for if you cause an accident.
These other coverages can be added to a policy to protect your own assets:
- Collision pays for damages to your vehicle sustained in an accident regardless of who’s at fault.
- Comprehensive pays for damage to your vehicle as a result of weather, vandalism or other non-collision losses.
- Medical payments coverage pays for your injuries as a driver or passenger.
- Uninsured motorist coverage pays for damage to your vehicle if a driver without insurance damages it.
You might also add optional coverages, like rental reimbursement and roadside assistance, to help keep your vehicle protected.
Paying Your Deductible
All first-party coverages like collision and comprehensive will come with a deductible. This is the amount that you agree to pay toward your vehicle’s repairs in the event of a claim. Carrying a higher deductible will shave some money off of your monthly premiums.
Understanding Your Rates
All insurance companies base their rates on a driver’s level of risk. When you get car insurance quotes, you are receiving a price based on how risky the insurer believes you will be. In other words, insurance costs more if you are likely to use it.
These factors are considered in car insurance rates:
• Age
• Experience
• Previous driving history
• The type of car being insured
• The state the policy is sold in
• Financial responsibility
You may find that your rates differ between insurance companies. This is because every insurer calculates risk differently. Therefore, it’s a good idea to comparison-shop for multiple car insurance quotes before settling on any one company.
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