Owning a first car is an exciting time in anyone’s life. From having unlimited freedom to experiencing a type of convenience most people around the world can only dream of — it’s certainly not something that should be taken for granted.
With owning a car though comes the responsibility of insuring that vehicle. You want enough coverage to repair someone else’s car in the event you’re at fault in an accident, or to repair your car if its vandalized or broken into. But, if you’ve never purchased auto insurance before, there’s probably a lot you’re confused about.
So use this article as a guide in understanding all the elements of auto insurance and use our online auto insurance comparison portal to see which providers are offering the best rates.
A premium is a monthly fee drivers pay for their vehicle to be insured. Premium costs couldn’t be more different from driver to driver, and even provider to provider. They largely depend on your age, gender, driving history, type of car you drive, as well as where your car will be parked and driven to on a regular basis. Premiums payments are generally made in monthly, quarterly or annual installments.
A deductible is the amount you’re required to pay out of pocket before your coverage kicks in. If you set your deductible to a higher amount, you’ll pay a cheaper premium as a result. Likewise, if you set your deductible to a lower amount, you’ll pay a higher premium.
Coverage levels are determined by the amount you would need to replace your vehicle in the event it’s totaled beyond repair, and are usually divided into three numbers. The first two numbers being related to medical coverage (the first per person, and the second for all people involved), while the last number concerns property damage.
So, the following coverage line of 80/150/50 means that a policy pays up to $80,000 per person in medical coverage, $150,000 for everyone’s medical coverage and $50,000 in property damage. Let’s get into more specifics below:
• Comprehensive • Collision
As you might expect, collision coverage protects your vehicle in the event its involved in a collision. Though, with collision coverage, there will be a deductible to pay prior to your insurance kicking in. Collision coverage is used to either repair your damaged vehicle or pay out the cash value if you choose not to repair it, or (knock on wood) it’s totaled beyond repair.
Liability insurance covers property damage and bodily injuries in situations where you’re at fault. For example, if you collide with a brick mailbox and destroy it, your liability insurance will cover the cost to repair the mailbox. If you collide with another vehicle causing injuries to the other driver and you’re deemed responsible, then your liability insurance might be used to cover their injuries. Liability insurance is ideal if you operate an older vehicle, live in an urban area, or drive routinely in high-traffic situations.
• Uninsured Motorist Coverage
An estimated 12.6 percent of motorists drove uninsured in 2012, the most recent data year available, according to the Insurance Information Institute. So needless to say it’s a good idea to have uninsured motorist coverage to protect against at-fault parties without insurance. You just never know.
• Underinsured Motorist Coverage
While it’s hard to put a number on just how many motorists are operating vehicles without the proper insurance coverage, you can be sure its common. Choosing underinsured motorist coverage protects you in the event somebody hits you without the coverage to pay for it.
• Personal Injury Protection
Personal injury protection is an overlooked coverage that can really come in handy if you happen to get seriously injured in an accident. PIP will cover medical bills and wages lost from not being able to work — in addition to any other responsibilities you’re not able to fulfill due to injury — whether you were at fault or not. And unlike most insurance coverage, PIP insurance will kick-in right away without having to wait for an investigation to be completed.
If your vehicle gets damaged as a result of theft, vandalism, weather or an animal encounter — comprehensive coverage will absorb your losses after a deductible kicks in.
It’s a big county, and each state will differ a bit in the financial responsibility they require from drivers. Whether it’s a minimum amount of car insurance, or being a victim of living in a state with a high concentration of uninsured drivers, what you’ll pay for auto insurance mostly rests on your state laws. Check out the minimum car insurance requirements by state here.
The more research you do, the more likely it is you’ll find an auto insurance company that will treat you as a person instead of a policy number. Sites like J.D. Power and A.M. Best Ratings shed light on a company’s reputation and provide a variety of statistics on how they all stack up against one another.
If you already have renters, homeowners or a life insurance policy with a particular provider, you can save a good amount on your premium by bundling your auto insurance policy. Having a clean driving record, safe vehicle and no prior claims with other insurance companies will trim the costs as well. Of course, as mentioned earlier, there are plenty of factors you can’t change. So be strategic and strive for a balance between adequate coverage and affordable premium rates.
Now that you have all the basics of auto insurance comparison, check out CoverHound’s auto insurance policy calculator to learn about the best policy rates and coverage suited to your needs!