Most states require all car owners to have automobile insurance. Auto insurance includes different coverage for different losses. These are losses that may occur in the operation of a car. The main coverage’s are liability (bodily injury and property damage), medical payments, collision, comprehensive and uninsured motorist.
Automobile insurance rates are based on driving records of drivers with similar characteristics. When insurance companies determine rates, they consider age, sex, marital status, cost of repairs, type of car, use of car and location.
With liability coverage you are protected in the event that you cause an accident. The insurance company will pay those who were involved. This is vital to auto insurance, but not the most expensive part. Liability coverage is defined by three numbers. Some companies require a minimum coverage such as 100/300/100. This represents what will be covered if you cause an accident.
100 = the amount of protection for each person injured
300 = the amount allowed per-person bodily injury
100 = the amount allowed per-accident property damage
For example, in one accident $100,000 would be available for each person injured, $300,000 for each person who received any bodily injuries, and $100,000 for any property damage sustained in the accident. Each state has minimum requirements. You may want to consider increasing your coverage if you currently have only the minimum. You will be expected to cover whatever your insurance will not if you cause an accident.
Collision and Comprehensive Coverage
Collision will cover any person driving your vehicle with permission, as well as your vehicle. Comprehensive will cover the vehicle as well as its contents. Limits for replacement would be the current cash value minus your deductible.
If you have an older car, it may not be worth it to have collision and comprehensive coverage, especially if the car is not worth much more than your deductible. If you choose not to have collision and comprehensive coverage, your premiums will be lower.
Making necessary coverage more affordable – There are many different ways to lessen the costs of auto insurance. Some examples are:
- Shop around, not all companies have the same rates.
- Take advantage of discounts:
- Buy auto and homeowners insurance from the same provider
- Good student discounts
- Maintain a good driving record
- Have good credit
- Increase your deductible when you choose to increase your coverage—this will lower your premiums.
Note: A deductible is the required dollar amount in your insurance policy that you must initially pay on any loss before insurance benefits can be received.
A premium is a required fee that you must pay on a set basis (monthly or yearly) to keep your insurance coverage. Premiums assist in covering losses reported to the insurance company.
Accidents are not planned: make sure you are adequately covered!