Car Insurance Guide – All You Need to Know

Car Insurance Guide – All You Need to Know
Car Insurance Guide – All You Need to Know
December 12, 2016

Cars have traveled a long way. From being symbols of status, they have metamorphosed into indispensible means of transport. In certain parts of the world, cars are the only means to commute.

After extensive research and weighing the pros and cons, you have bought your dream car. What next?

Read also: Car Insurance - All You Need to Know

Insure it, of course!

Why do you need Car Insurance?

  • Car Insurance is almost mandatory in most of the world. It is illegal, in all states of the U.S.A., to own and drive a vehicle without a basic insurance.
  • It protects you, the owner and your vehicle, which is your valuable movable assets from distress and damage.
  • Car Insurance provides you legal protection through an Attorney in the event of an accident.
  • It covers the cost of repairing the damaged vehicle.
  • It covers the medical costs of both the parties involved if an accident occurs.
  • Car insurance offers protection from natural calamities and from theft or vandalism.
  • Most importantly, it gives you peace of mind.

How do you insure your car?

There are several plans available to choose from. The plan that suits you will depend on a number of factors like the type of car, where it is usually parked, where you live, what you use it for, and your age and driving experience. Though you cannot do much about your age and experience, you can save a tidy sum on your insurance premium by following these guidelines.

Types of Car Insurance

There are many types of insurance available to include in your policy. The standard types of insurance include the following:

  • Property damage liability – this covers the damage to other vehicles when the accident is caused by you.
  • Bodily injury liability  –   this covers the injuries sustained by a person involved in an accident that was caused by you.
  • Personal Injury Protection – this covers you and your passengers from injuries in an accident.
  • Collision Coverage – this protects your vehicle from damages. There is a deductible of $250-$1000. The rest of the bill is handled by the insurance.
  • Comprehensive Coverage – covers your vehicle from events like theft and vandalism.
  • Uninsured Motorist Protection – protects you if you are involved in an accident with a driver without proper insurance.
  • Extras – These are add-ons to your policy and could include roadside assistance and rental car insurance

What is Basic Car Insurance?

This is the most basic form of car insurance and is the cheapest. This will protect you from any lawsuit in the event of an accident caused by you. If you cannot spare much money towards your insurance policy, this plan works best.

Pros of a Basic Car Insurance

If you are young and an inexperienced driver, you must definitely consider purchasing this insurance.

It may be the best, financially viable option for you. This only gives you a legal cover and will not pay for any damages to your car. But the cost of repairing your vehicle may be negligible compared to the costs involved in a legal battle. If your car is over 5 years old, a basic insurance would be especially judicious and sufficient as you need not consider replacing the damaged parts.

Cons of a Basic Car Insurance

The biggest drawback of a basic insurance is that it will not cover any of the damages, either to the car, or to your person. This becomes a poignant issue when you are not at fault, but the other driver who caused the accident is not insured. You may end up paying a hefty sum out of your pocket to cover damages, or worse still, wage a costly and lengthy legal battle against the real culprit!

A word of caution!

If you do not own your car and are still paying your car loan, you would be advised to have a collision cover in addition to your basic insurance. Failure to do so will be considered a breach of contract.

What is Online Car Insurance?

In today’s world, when people seldom have a moment of rest from their busy lives, online services have become the prescribed order of the day. Online Car Insurance is very much available and is available 24/7 and preferred by many. The obvious advantage is the convenience in timings. There is no need to wait in long queues anymore and any queries you may have are answered immediately (well almost), by online chats. You can also save on paying the middleman!

The negative aspect will be that you have to do all the research yourself, which can be time consuming.

You need to be computer literate in order to handle your online documents. The biggest downside is evident when you are in a fix. It can be frustrating to hear automated voice messages repeatedly when you are seeking immediate solutions.

Tips and Discount offers

  • Use Car Insurance quotes to compare the policies offered.
  • Compare different insurers to know of their best deals.
  • Get your Car Insurance from the same people who did your home or life insurance. Having the same provider can help you avail of special discount offers.
  • Use a Black box to track your driving. This helps you drive safer, with responsibility. This influences the insurer to reduce your premium.
  • If you usually drive a fixed number of miles annually, you can claim a low mileage discount.
  • If you are a safe driver with a clean record, you can qualify for a safe driver discount. Even if you are not a perfect driver, you can still qualify for a discount by volunteering to participate in Defensive Driving classes.
  • If you are a retired person, aged 40-65 years, you can get a discount.
  • If you belong to certain Alumni associations or Clubs, you may get discounts.
  • Always pay the premium annually, if you can afford to, and save 20% on the total cost.
  • Visit the websites – uswitch.com and Edmunds.com for tips on selecting the correct Car Insurance Policy.

Drivers who may get discounts:

  • New drivers provided they have taken a driver-training course
  • Older drivers if they have taken a refresher course
  • Student with good grades
  • Members of affinity groups such as college alumni
  • Members of certain professions and occupations
  • If you have installed anti-theft and safety requirements
  • If you have previously bought other kind of insurance policy from the same insurer

How to control your cost factors

Luckily, there are several ways to control your car insurance cost factors. Here they are:

A good credit score can help

As you may already know insurance companies often check your credit score. You pay lower amount of premium when you have a good credit score and vice versa. So, how you manage your personal and family finance can matter. The common steps that you can take to improve your credit score:

  • Try to keep your credit balance lower than your credit limit.
  • Do not use department store credit cards. These cards may lower your credit score.
  • Error correction: You should regularly check and correct your credit-reporting errors
  • It is important you pay your bills on time

It is a good idea to request to be rescored once per year.

Reporting reduced mileage can result in lower costs

If you drive less, it can help you to cut 5 to 10 percent off your premiums. Your insurer may not notice it. You should inform your insurer that you have driven less and ask for a lower premium. A common way to achieve reduced mileage is – to live near your workplace and thus, you need to drive less.

On the other hand, your insurer may contact you if you are driving more and increase your insurance rate.

Pay less for certain car models

Premium amount may vary depending on car model. For some car models, you pay a higher premium and for some other models, you may pay a lower premium. So, remember to ask for premium quotes on different car models. You may find some helpful information from this online resource: http://www.hldi.org/research/hldi/composite_intro.html

Do you know there are scammers?

Some scammers can stage accidents to get paid for accidents and damages where you are the real innocent and that scammer is the culprit. But the scam will stage the accident in such a way that you will be the person who is responsible for the accident and/or damage and he is the victim. When you become such a victim, you pay not only their demanded money but also higher premium to your insurer for a long time.

Be more careful when you let a teenager to drive your car

Accident data shows that teenagers have higher accident rates. There are two main reasons – they lack experience and they are immature. But after a teenager of your family have an accident, your premium can go up to 50% and even 100%.

So, how can you do your best to avoid this? Here are some suggestions:

  • Do not allow a teenager drive your car until he/she becomes 18 or 19.
  • Let the teenager drive only after he/she has successfully completed a driving training course before getting a license.
  • Make sure the teenager knows all the driving laws.
  • Observe if he/she drives in a safe manner. If he/she is driving carelessly, do not let him/her to drive your car(s).

Some other helpful information

  • Did you know you could save money by switching insurers? So, make sure to compare premiums and ways to save money on other types of insurance. Remember that you can do these by online researches. You can alternatively contact some insurers by calling at their office phone numbers.
  • Before buying an insurance policy, make sure to read it thoroughly. There may be clauses you may not like, agree to or find difficult to comply with. For example, there may be a clause that says you must repair your car in a specific repair shop. Later, you may discover that that repair shop is so expensive that it is hard to cover their bills. In the same time, you may discover that there are a lot of cheaper repair shops in your city but you cannot go to those repair shops because of the agreement clause(s).
  • If you are quickly selecting an inefficient insurance plan, this will sooner or later bite out more of your household budget. So, it is important you take your time and properly check available insurance options that you can afford to buy.
  • If you stay with an insurer for long time such as 10 years or more, they may offer you very good rates. But if you change your insurers every year, they will find it difficult to offer you a better rate than the rate of your long-term insurer.
  • Many insurance agencies use credit-based insurance scores in setting premiums. The better you understand these scores, the better decision you can make.
  • In some places or countries, unemployed people are allowed to drive cars without insurance. In such a case, you may be the only one who will bear all the costs or liabilities after an accident.
  • A cheap insurance policy may not be better than all other more expensive policies. The reason is simple – even though a top-rated insurer can charge you more, they can offer you a lot more facilities. Overall satisfaction matters. A top-rated insurer can make your insurance purchase experience highly satisfactory. You may not regret for the extra money you pay to a top-rated insurer. On the other hand, you may be surprised to get cheap services out of your cheap insurance. So, it is better to buy from a top-rated insurer after comparing all the top-rated insurers.
  • Will you be happy with cheaper replacement parts when an accident occurs? Some insurers will offer cheap low quality parts after an accident. Do, do not forget to ask if you will get original parts or cheaper replacements.
  • The more deductible you pay per session, the lower amount of total premium you pay. If your monthly deductible is $200 per month, you will pay a lot more total overall insurance than the person who pays $1,000 per month. So, try to pay more per month or session and reduce your total overall premium amount.
  • If you cause damage in accidents, you may need to pay for bodily injury and property damage. So, it may be a wise decision to buy an insurance policy that covers bodily injury and property damage. More specifically, a standard car insurance policy can pay for bodily injury up to $100,000 per person and $300,000 per accident. It may pay for property damage up to $100,000. If you are a rich person, you should consider buying an insurance policy that pays for even higher amounts.
  • Make sure to check what you get in the case of repairing your car. If your insurer has replaced your original parts with cheap parts that prone to rust and corrosion, this may cause more and/or regular other problems and accidents. So, ask your primarily selected insurers what you get in a repair. Another issue is – be informed about the repair shop where they will send your car. Professional repair service matters.
  • Oftentimes, it is a government requirement that you keep your proof of insurance in your car or in your wallet. Ask for a handy insurance ID card from your insurer. It is easy to carry this card. Keep this card in your car or carry it with you.

Answer to some questions

Some of you may ask one or more of these questions. So, we are trying to answer them:

Why do I need car insurance?

There are three reasons: (1) this can help you to protect your car, you, and your passengers (2) if you are liable for an accident, you may lose a major part or all of your property such as home, and savings (3) in most places in the world, it is illegal to drive a car without car insurance.

Can I adjust my coverage?

Yes, of course, you can. Depending on your financial or other situation, you can adjust your car insurance coverage. For example, you have teenager who will start driving your car soon. So, you may need to include him/her in the coverage.

What is the most common way to pay less?

Use your deductibles. Your deductible is what you agree to pay based on your insurance agreement. If you set higher deductible, you will pay less. If you prefer to set smaller deductibles, you will surely pay more.

Is the payment rate fixed?

Of course not. Many factors such as where you live, your age, your driving record, miles you drive on average, etc. influence rate that your insurer set for you. Make sure you ask for the list of the things that may influence your insurance rate.

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