1. How much car insurance coverage do I need to have? Most people are aware of the fact that the law requires them to have car insurance if they own or drive a car. However they often wonder exactly how much insurance coverage is required. This varies from state to state. At the very least, however, you will need minimum liability insurance. This means that you have insurance to cover any damage that you do to someone else when driving your vehicle.
2. What happens if I don’t have this coverage? Many people wonder what the risk is of not getting the minimum amount of car insurance required in their state. The answer is that you can face legal consequences. The nature of those consequences depends on what you’ve done (such as caused a car accident without insurance) and what state you’re in. At the very least, you’ll be financially responsible for any damage that you do when driving. Typically you’ll also face an additional fine.
3. What is the difference between collision insurance and comprehensive insurance? These are the two basic types of insurance that people look at. As the name suggests, collision insurance covers costs that occur when the vehicle is involved in a collision. In contrast, comprehensive insurance covers non-collision damage such as theft or auto fire. People usually want both types of auto coverage. However, if you were keeping a vehicle in storage then you might only get comprehensive insurance in case of a theft. In contrast, if you’re primarily concerned about car accident damage then you’d get collision insurance.
4. What other insurance terms should I know? Additional types of auto insurance and terms to know include:
- Bodily injury vs. property damage liability. The first insures medical expenses for people injured in a car accident; the second covers damaged property including the car.
- Medical payments. This pays for reasonable medical expenses as well as funeral expenses for those who are covered and get in an accident. This may be separate from a similar type of insurance called personal injury protection.
- Uninsured motorist. This covers your costs in case you are hit by someone who is driving without insurance.
- Rental reimbursement. This pays for the cost of a rental car when you need to get one if your car is being repaired due to an accident.
- Emergency road service. This covers things like towing because of a car breakdown.
5. What affects my insurance rates? Most people want to pay the lowest car insurance rates possible. Many things affect your rates including:
- The length of time that you have been driving. Younger drivers usually have higher rates.
- Your driving record. If you have a history of car accidents then you’re more of a risk and will have higher rates.
- Your credit history. If you have a good credit score then you should be able to get lower rates.
- The type of car that you drive. Expensive sporty cars tend to have higher rates than older, cheaper cars.
- The state or city that you’re in. Some areas are considered higher risk and therefore it costs more to be insured there.
- Your deductible and coverage choices. You can choose higher or lower deductibles and more or less coverage to affect the cost of your rates.
6. What is my deductible? Speaking of deductibles, what does that even mean? It is the amount of money that you will pay out of pocket before the insurance kicks in. For example, if you get involved in an accident that costs $1500 and your deductible is $500 then you will pay $500 and the insurance company will pay the rest ($1000). A higher deductible means lower rates but you’ll pay more if you do get in an accident.
7. How do I choose an insurance company? There are many things to take into consideration but basically you want to do your research. Choose a reputable company that works well with the body shops in your area. If you have a very tough time making a decision, work with an auto insurance broker to narrow down your options.
Mitch blogs over at , an insurance blog providing insurance tips & tricks.