Most drivers consult with friends and family when it’s time to select a car insurance policy. During the process, they often receive conflicting information about everything from coverage requirements to the impact of an accident on their premium. As you shop around for the best policy, ask yourself these questions about auto insurance to ease the confusion.
WHAT COVERAGE SHOULD I PURCHASE?
Since states determine their own coverage requirements, this varies according to where you live. In most states, drivers are required to have a minimum amount of liability insurance, which covers injuries and property damage you cause during an accident. If your state has no-fault laws, you will be required to purchase personal injury protection, also known as PIP, which covers medical expenses, lost wages, and other damages for anyone covered by your policy.
Beyond the minimum requirements, you usually must purchase collision and comprehensive insurance if you have a lease or auto loan. Collision insurance covers damage to your own vehicle from contact with other vehicles and non-moving objects such as trees and fences, even in the event of a total loss. If damage is caused by storms, floods, or other natural causes, comprehensive insurance will cover the cost of repairs or replacement. It even protects you if your car is vandalized or stolen.
WHAT FACTORS DETERMINE MY INSURANCE PREMIUM?
You may be surprised to learn that you were quoted a higher premium than a friend in a neighboring ZIP code, triggering questions about auto insurance rates. As with coverage requirements, location is a key factor, but in this case, providers look much more locally. If you live in a metropolitan area, providers may assign more risk based on the level of hazards and vandalism to which your vehicle may be exposed.
Regardless of where you live, certain cars will be more expensive to insure based on how much it costs to repair or replace them. A luxury car may be more expensive to fix, and certain models are stolen more often for their parts. You can lessen the impact on your premium by opting for location tracking and anti-theft technology.
As they assign risk to determine cost, insurers also will factor in your driving record. Safe drivers generally pay less as they have demonstrated the ability to navigate hazards, avoid accidents, and incur less damage to their vehicle, all of which result in fewer insurance claims.
Additional factors such as age, gender, and marital status factor into your rate. For example, middle-age drivers generally pay less than drivers under 25 or over 65 as do married people, who statistically have been shown to be less likely to get into an accident.
WHAT INSURANCE DISCOUNTS ARE AVAILABLE?
If you have a history of accidents and violations, you might want to sign up for a safe driver course. It is important to show insurance companies that you’re committed to improving skills such as defensive driving. Many companies will reward you with a discount on your premium.
Discounts may also be available for bundling home and auto insurance under one plan or for teen drivers with good academic performance. As you research plans and carriers, remember to ask about discounts, as this is one of the top questions about auto insurance that can help you save money.
SHOULD I SELECT A PLAN WITH A HIGH OR LOW DEDUCTIBLE?
As you evaluate the plan that suits your circumstances, you will have to choose between coverage with a high or low deductible, which is the amount you pay before your insurance pays for damages. There is an inverse relationship between your deductible and premium, so you will pay a lower premium for a high deductible plan. However, that doesn’t mean it will cost you less over the course of the year. If you have to make a claim, high out-of-pocket costs may be difficult to afford, particularly if you are on a fixed income.
WILL MY INSURANCE RATE INCREASE AFTER AN ACCIDENT?
The physical and emotional toll of an accident can be overwhelming, not to mention the resulting expenses. As your insurance company helps you navigate the claims process, you may wonder if your rate will increase. Each carrier handles this situation differently. Some have accident forgiveness policies, and others may assess your driving record as well as the severity of the accident before raising your rates. Ask your carrier about these policies to avoid an automatic premium increase.
With answers to the top questions about auto insurance, you can feel more confident comparing plans and carriers. Remember to review your coverage annually as policies and rates change, and you may even qualify for a new discount or two.