Know the basics of auto insurance

If you have wrecked one’s car and do not want to pay for the damages out of pocket, use your auto insurance. It will protect you against the financial losses if your car runs into somebody. Alternatively, it will also cover you if someone else damages your car.

Auto insurance is a legal agreement under which your vehicle is insured. It is an agreement between you and an insurance company, where you promise to pay monthly premiums for the insurance and the insurer agrees on paying for the liabilities and damages described in your policy. By insuring your vehicle, you can avoid the financial losses incurred during its usages.

The basic types of coverages offered:

While shopping for auto insurance, you need to have a good understanding of your priorities. Make sure that you are not under-insured. The following types of coverages are available in auto insurances-

Liability coverage: When you are the cause of an accident, you are liable to pay for the damages done to the other parties. Your liability coverage pays for the damages caused by you. It has two components- bodily injury liability and property damage liability

Collision coverage: The ‘collision coverage’ covers the repairing cost of your car after accident. The amount of coverage can vary between 55% and 90% depending upon the insurance company. However, if the repairing cost exceeds its market value, the insurance company will only pay the price of the car.

Comprehensive coverage: The comprehensive insurance covers you against theft, vandalism, catastrophe, fire etc. However, if your car is worth less than what you pay for coverage, better avoid this type of coverage.

Uninsured and under-insured motorist coverages: Uninsured coverage protects you if you are a victim of an accident where the other driver involved is untraceable. The under-insurance coverage protects you when the liability coverage of the other driver, involved in the accident, is not sufficient to compensate for your damages. Medical payments coverage (MedPay): It will take care of the medical expenses that you have incurred in a road accident. Among the insurance coverages mentioned, liability coverage is mandatory in all states, while the rests are optional.

The factors affecting your insurance premium:

The deciding factors are- your age, your driving record, the make and model of your car etc. A spotless driving history will help you to get lower premium quotes from the insurers. Your gender is also a crucial determinant of your premium. Men have to pay more as premium than women do on the same amount of coverage.

How to reduce the cost of your insurance: Here are some tips you can practice to lower the cost of your auto insurance.

Deductible: It is the amount you have agreed to pay out of pocket before your insurer settles the claim. Higher the value of deductible, lower is the cost of insurance. However, make sure that you are capable enough to pay the amount out of your pocket.

Exclusions: If you have enough health insurance and disability benefit, you can do away with medical payment coverage or insure for the minimum amount. You can also exclude collision and comprehensive benefits if you are driving a car worth less than $1,000.

After home, car is the second big investment that we make in our life. Therefore, insuring it comes at the top of our priority list. But at the same time, we need to ensure that we are bagging the best deal. Shopping around for the auto insurance will help you to get the lowest possible quote from the insurer. Because, the premium rate varies widely among the insurers even for same car and same amount of coverage.

Some Resources:

Car Insurance Academy Everything about auto insurance, vehicle insurance, local best deals, comparisons, etc.

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