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Auto insurance is a policy that pays for damages incurred in an accident. It typically covers bodily injury and property damage, and some states require uninsured motorist coverage.
Your auto insurance premium is determined by factors such as your driving record and credit score. You can lower your premium by dropping optional coverages or raising your deductible.
Coverage
Auto insurance provides a range of coverage to protect you against the costs of an accident or other loss. This can include bodily injury, property damage and more.
The minimum mandatory coverages for most states include liability protection – which pays for the cost of medical bills, funeral expenses and other damages to others caused by you or your vehicle. You can also choose to purchase higher liability limits that will provide greater protection in the event of an accident or other incident.
Liability coverage is also known as third-party insurance, and it provides protection against the cost of damages caused by you or your vehicle to other people. It includes coverage for bodily injury and property damage, as well as uninsured motorists and underinsured motorists.
You can also choose to add more coverage to your policy, such as comprehensive and collision. These additional policies cover certain losses that are not covered by your liability insurance, such as theft, fire, hail damage and vandalism.
Whether or not you choose to add any additional coverage to your policy depends on what your needs are, and what your budget is. It is always a good idea to consult with your agent, broker or insurer before making any changes to your coverage.
In most states, drivers are required to carry a minimum amount of liability insurance before they can register their vehicles. If you do not have this minimum level of protection, you could face fines and possible jail time.
Many drivers opt to add higher limits of liability and property damage protection to their policies in order to provide more coverage for their own assets should they be sued after an accident or other incident. Some policies even offer an umbrella policy, which provides additional protection for more serious accidents and lawsuits.
Some states require drivers to carry a minimum amount of medical payments or personal injury protection (PIP) coverage as well. This will pay for your own and other passengers’ medical bills and lost income if you are injured in an auto accident.
In addition, most drivers are required to carry collision and comprehensive coverage, although these are optional in most states. Collision coverage pays to repair or replace your vehicle if you are in an accident with another car, while comprehensive coverage covers your car against damage caused by something other than a collision, such as hail damage, fire or vandalism.
Premiums
Premiums are the monthly or annual payments you make to your insurer in exchange for protection in case you need it. The amount of your premium depends on a number of factors, including the type of coverage you choose and how much liability you carry.
Insurance companies try to balance the cost of providing you with coverage against your likelihood of needing it. Insurers consider many things when determining your insurance rate, including your age, where you live and your credit score.
The car you drive – Vehicles with high safety equipment and engine sizes may qualify for discounts, while newer models tend to cost more than older ones. In addition, your state’s minimum insurance requirements determine what types of coverage you need to meet the law.
Your driving record – Lapses in coverage, speeding tickets or other moving violations, at-fault accidents and drunk driving convictions may raise your insurance rates. These incidents are outside your control, but you can take steps to improve your record.
Other drivers on your policy – If you add more drivers to your insurance, your rates may rise. Insurers generally charge higher premiums for drivers who are considered a risk, such as teenagers or those with a history of speeding violations.
Insurers also look at your driver history, the age of your car and other factors. For example, drivers under the age of 25 are more likely to be involved in accidents than older drivers.
Location – Your area’s crash and theft rates affect your insurance. In some areas, particularly in cities with heavy traffic and more crime, insurance premiums can be higher than in more rural locations.
Your personal information – Your name, address and Social Security number are some of the factors insurers use to calculate your rate. While some states prohibit using your credit score in calculating insurance rates, it can still be helpful to plug your current information into Credible’s partners’ tools to get a more accurate idea of what kind of auto insurance rates you might qualify for.
You can also save money on your premium by choosing a lower deductible or lowering the limits you carry on your insurance. Some insurers also offer usage-based discounts that are triggered by certain behaviors, such as driving less than an average amount of time.
Deductibles
Deductibles are a key component of most insurance policies, and they apply to each claim made during the term of the policy. These amounts are chosen and agreed upon by the policyholder when they buy a policy, and usually represent a share of the costs that the insured will be responsible for in the event of an accident or other covered loss.
MoneyGeek explains that most auto insurance deductibles are designed to protect the policyholder from being hit with an unexpected bill that they don’t have the cash to cover. This can happen in situations such as a crash where the vehicle requires extensive repairs.
Choosing an appropriate deductible can be a challenging decision. It depends on several factors, including your budget constraints and personal tolerance for risk. It’s also important to consider the value of your car, the age and condition of your vehicle, the requirements of your lender, and any other financial concerns you may have.
For instance, if you have a low-value vehicle that’s only worth a few hundred dollars, it wouldn’t make much sense to choose a high deductible. However, if you have a larger-value car that’s worth thousands of dollars, a higher deductible might be more attractive because it would save you money in premiums.
Another option is to choose a deductible that’s “disappearing.” This means that, over time, if you remain a safe driver, your deductible will decrease. Depending on the type of coverage, this can save you up to 30% on your premiums.
If you are unsure about your deductible choice, it’s best to talk to an independent agent who can walk you through the details of each deductible and help you choose one that makes the most sense for you. They can also run quotes on multiple deductibles to find the best fit for your needs.
The right deductible for you is the deductible that you can comfortably afford to pay out-of-pocket should you need to file an auto claim. If you can’t afford to pay out-of-pocket for a covered auto claim, it could delay or even prevent you from getting the necessary repairs done and your vehicle fixed properly.
Claims
There are many different types of auto insurance, each with its own process for filing a claim. But regardless of the type of coverage you have, there are certain steps that should be taken in order to make sure your claim is processed properly.
First, it is crucial to take note of the details of the accident. This includes license plates, other vehicles involved, the direction of travel and any traffic signs that may have been in use. Also, make sure to get the other driver’s name and contact information.
Once you’ve documented the details of the accident, you should contact your insurer and file a claim. This can be done over the phone or by visiting your insurer’s website or mobile app.
After speaking with your adjuster, you will need to complete a form known as a Proof of Loss (sworn statement in support of your claim). Then, your claims representative will determine the extent of the damage and explain the coverages provided under your policy.
Your car insurance should cover repairs to your vehicle after an accident. This can include things like repairing your bumper, replacing the roof, fixing a cracked windshield and any other damages caused by the accident.
If the repairs cost more than the value of your vehicle, you will likely have to pay out-of-pocket. But if the damage is less than your deductible, you’ll be reimbursed by your insurance provider.
The claims process for your policy is designed to be simple and convenient. Most companies have a website or mobile app that makes it easy to report a claim and track the status of your repair work.
In addition, some policies offer diminished claims value if the vehicle is a total loss. This is a payment made by your insurer that is equal to the amount of money it would have paid you had you not filed a claim.
It is important to keep in mind that the claims process is not always a smooth one, so be prepared for a long wait before you receive your payment. It can take up to several weeks for your claims to be processed and for the funds to be available in your bank account.
