Auto Insurance

By Thursday Bram on 8 April 2010 (Updated 4 April 2011) 2 comments

Auto insurance is meant to cover the expenses that can go along with a car accident. But it's not just something that's nice to have. In many states it's required by law. That makes it especially important to get the best car insurance rates. There are a lot of factors that go into determining just how much you'll pay to insure your car, from your age to the zip code you live in, but there are ways to get the best possible price.

Car Insurance Options

Just what kind of car insurance is available to you can vary from state to state. In general, though, there are seven different types of car insurance that you should consider:

1. Liability insurance
In the event that you are at fault for an accident, liability insurance will cover the cost of the injuries and property damaged caused by the crash, with the exception of your injuries (and those of other people on your policy) and the damage to your vehicle. In general, it's best to go beyond state minimum requirements because you are personally liable for claims that exceed your auto insurance's coverage.

2. Collision insurance
With a collision insurance policy, your insurer will cover repairs to your car in the event of an accident. If your car is totaled, your insurer will pay you the value of your car before the crash — not what it was worth new. Many insurers do offer you the option to add coverage so that you would receive an amount closer to the price of a new car, but you will be required to pay extra.

3. Comprehensive insurance
Collisions aren't the only thing that can happen to your car. Theft, animal collisions and other damage can be costly. A comprehensive insurance policy covers such situations.

4. Uninsured / underinsured motorist protection
If the other driver in an accident has no insurance (or not enough to cover your medical expenses and vehicle damage), an uninsured motorist policy will cover at least the injuries to anyone riding in your car. In some states, it may also cover property damage.

5. Medical / personal-injury protection
As long as you have good health insurance, you may not need medical or personal-injury protection. However, such a policy can provide coverage for you and your passengers, no matter who is at fault for an accident.

6. No-fault insurance
Currently available in 12 states, no-fault insurance covers injuries and property damage no matter who is determined to be at fault.

7. Gap insurance
If you owe money on your car, especially if you owe more than the car is worth, gap insurance allows you to pay off the car in the event that it is totaled.

It's important to be very familiar with your financial situation before you sit down to get auto insurance quotes. Depending on your financial situation, you may need certain types of insurance more than others. For instance, if you could easily replace your car if it was totaled, you may not need collision or comprehensive insurance, bringing your costs down. You should also have an idea of what sort of deductibles you can afford out of pocket. If you can't afford the deductible, having insurance doesn't help you as much as it should.

Finding Car Insurance

It's important to shop around when looking for car insurance, because your rates can differ dramatically between companies. But you don't necessarily want to pick the insurance company with the lowest rates. Check into the record of any company you're considering purchasing car insurance from. You can learn about a company's consumer record through the Consumer Action Handbook from the U.S. government. In particular, you need to know about your insurance company's history of claims, because many of the cheapest auto insurance providers keep their rates low by making the process for filing a claim virtually impossible.

Many car insurance companies offer a variety of special discounts. Whether you're dealing with an insurance agent or directly with the company, make sure to ask about what discounts are available. From rewarding good driving records to good grades (for drivers still in school), discounts can make a big difference in the rates you pay.

Keeping Your Insurance Rates Down

Your auto insurance rate isn't based solely on your driving record, no matter how good a driver you are. In order to keep your rates at a reasonable level, there are several steps you should take. One of the most important is to keep your credit score up. Insurance companies use your score to set your premiums and doing something that hurts your credit score, like failing to pay all of your bills on time, will increase your premium.

You should also take insurance into account when purchasing a new car. Certain cars, such as sports cars, are more expensive to insure — as are those with high-tech features. While the cars that are the least expensive to insure may not catch as many eyes on the street, they are often among the safest cars available.

You will find that major life events, such as marriage or having a child, can have a positive effect on your insurance premiums. Combining policies with your spouse will often make you eligible for a discount. Adding a teenage driver to your policy, however, can increase your premium up to 20%. It is often cheaper to buy an old car and list your child as the driver rather than listing your child as a driver on your car.

In the event of an accident, it's important to inform your insurer right away. It's worth noting that telling your insurer is not the same as filing a claim; it may be more cost effective not to file a claim, depending on the specific situation. However, keeping your insurance company in the loop will protect you in the event of injuries that are not apparent at the time of the collision. It's important to read the details of your policy, preferably before you have to make a claim. How an auto insurance company handles a claim can differ significantly between states and even between policies.

Click here to view the current auto insurance rates in your state.

 

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Guest's picture
Ins. Guy

Car Insurance Options 2 through 5 are not sold as separate policies. They are coverages added to the policy providing the liability coverage. Collision and comprehensive (other than collision) are sold on a vehicle by vehicle basis.

Collision and other than collision are subject to a deductible. Some companies still sell ACV ($0 deductible) other than collision.

Uninsured / underinsured motorist protection varies by state. In some instances there does not have to be another vehicle involved for this coverage to come into play.

Medical payments coverage may be a good buy even if you have good medical coverage. It can be used to cover the co-pays and deductibles on a hospital visit.

Guest's picture

In reference to your comment "In many states it's required by law." does that mean that there are states where you don't have to have insurance? That's crazy? What happens if someone causes you serious injury? Who can you claim against? In the UK it's mandatory to have auto insurance, but it's fascinating to hear that this isn 't always the norm elsewhere.