Understand How Car insurance Works

Car insurance is required by every car driver, but how many drivers take a close look at the factors which determine the price they pay each month or the different types of coverage available? Some drivers keep the policy the same, only changing it when switching cars or adding a new driver to the plan. There are many different factors which affect the auto insurance premium and different types of required and non-required types of coverage. Both of these are important to keep track of, even if you already have car insurance.

Factors Determining Auto Insurance

Car insurance premiums are based on a number of different criteria, including factors that you cannot control, factors you can control, and then additional little factors.

Unfortunately, there are factors out of your control that car insurance agents look at and take into consideration when determining your premium. Your age and gender are two factors that help in the determination process, but are factors you cannot control. Statistically, the youngest and the oldest drivers are most prone to have accidents, causing the premium to increase. Similarly, women are seen as safer driver based on auto accident statistics, and are often given lower car insurance premiums.

Although you cannot control these factors, there are some factors which you can change in order to improve the principal in your automobile insurance plan. Your location plays a part in the plan; those who live in rural areas are less likely to be in an accident or have a car stolen than those living in a large city, resulting in a lower principal for those outside the city. Acquiring speeding tickets and being caught running red lights can increase your principal.

The car you drive also affects the principal. Having a sports car may be the car of your dreams, but unfortunately, your dream car can come with the nightmare of a high insurance premium. Just like with trying to take out a loan, car insurance agents follow the same view on the credit score: the lower the score, the higher the risk, and the higher the premium; the higher the score, the lower the risk, and the lower the premium.

Other little factors also take a role in determining your auto insurance plan’s premium. How far do you drive to work? If you live close enough to walk to work and do not put miles on the car during typical morning and evening commute, be sure to bring this up as this can lower your premium. The miles you drive each year, the number of years you have been driving, and any special driving courses (such as driver’s education in high school) can also help lower the car insurance premium.

Types of Auto Insurance Coverage

Each automobile insurance plan comes with packages of different types of auto insurance coverage, with these packages often being seen as automobile insurance rules since they dictate what the insurance company will and will not cover in the event of an accident. Some states require certain policies, so it is important to check with your state guidelines before purchasing auto insurance. The main types of auto insurance coverage are liability, collision, PIP, medical coverage, uninsured motorist, underinsured motorist, comprehensive, and rental reimbursement.

Liability pays for medical expenses, lost wages, and pain and suffering due to accidental bodily or property damages to others. This can include bodily injury or damaged car due to an accident. Each state has different requirements for a minimum amount of liability coverage you have; however, you can purchase more coverage than required.

Collision covers any damages to your vehicle that are caused by an accident with another vehicle or object, such as a telephone pole. The main difference between liability and collision is that liability covers damages to others, whereas collision covers damages to you.

PIP, or Personal Injury Protection, is not required in all states. This type of auto insurance coverage pays for medical expenses for the insured driver if injured in an auto accident, regardless if the driver is the one who caused the accident. Medical coverage pays for medical expenses when injuries are caused by an auto accident, regardless of fault. PIP and medical coverage sound similar, but have one difference: PIP only covers the insured driver.

Uninsured motorist and underinsured motorist coverage are similar and deal with drivers without proper liability insurance. An uninsured motorist package covers damage to your car caused by an auto accident when the driver does not have liability insurance. An underinsured motorist package covers damage to your car caused by an auto accident when the driver does not have sufficient liability insurance.

Comprehensive covers for loss due to damages that are not caused by automobile accidents, such as through a fire, flood, or theft. Rental reimbursement pays for a rental car if your car is damaged due to an auto accident.

By understanding automobile insurance, you will be able to keep your auto insurance principal low and have insurance for anything life may bring your way. Keep your insurance agent up to date on all the happenings with you and your car, and you will be able to have car insurance which will protect you and the drivers in your family.


Get Auto Insurance Quotes


Compare Insurance Rates

Get Insuance Quotes

Find Insurance Agents
Join the Insurance Directory