Everything You Need To Know About Auto Insurance

This article explains everything you need to know about auto insurance!

Buying auto insurance, whether online or through an agent, can be a confusing process.

The internet makes it easy to compare policy prices and rates, but it can still be confusing with all the jargon and acronyms used by insurance companies.

It can also be clouded by long-standing misunderstandings about the ins and outs of insurance.

For example, many people think that red cars are more expensive to insure, but that’s simply not true. Speed and accidents are what drive up rates, not red cars.

“If you’re driving a red car, and you get a speeding ticket or an accident, that’s what drives up your rate, not the color of your car.

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Insurance companies take a lot of things into account when setting your premiums, including the make and model of your car, the age of your vehicle, engine size, and cost to repair, but not just the color.

Everything You Need To Know About Auto Insurance

Below are 7 things you should know about auto insurance.

1. How prices are determined

Each insurer has its own approach to premium pricing, but they all use the same fundamental elements. These include obvious factors like the make and make model of your vehicle, how you drive (e.g., do you drive during commuting hours?), and your driving history.

Other factors that go into the mix include:

  • Your age, gender, and marital status: According to statistics, young drivers (those with less than 10 years of driving experience) and male drivers have a higher accident risk. On the other hand, married drivers have a lower accident risk.
  • Where you live: If you live in an urban area where there’s a lot of crime, you’re probably at a higher risk than someone who lives in a rural area where there’s less traffic and there’s less car theft and break-ins.
  • Your credit score: Many states allow insurance companies to take credit scores into account when pricing policies. The insurance industry claims its data indicates that drivers with higher credit scores have fewer accidents than those with lower credit scores. Consumer advocates argue that this practice penalizes low-income drivers and want to ban it.

2. Insurance premiums for a higher-priced vehicle are not always higher

When shopping for a new car, it’s important to know how much your insurance will cover for the different models you’re considering.

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For example, an expensive SUV could have higher claim rates for accidents and theft than a cheaper car, resulting in lower premiums.

3. Collision vs Comprehensive Coverage

When it comes to car insurance, it’s clear that there’s a lot of confusion. A lot of people don’t know what they’re getting into. A survey from InsuranceQuotes showed that almost two-thirds of people don’t really understand what their car insurance policy covers in the event of an accident.

The Insurance Information Institute (III) reports that:

  • Comprehensive: Protects against theft and non-collision damage, including fire, flood damage, vandalism, hail damage, rocks or trees falling, or being hit by a deer.
  • Collision: Reimbursements for damages to your vehicle caused by an accident with another vehicle or another object (e.g., tree or guardrail), when you are at fault for the accident. It also covers damages caused by potholes or rollover accidents.

Both Comprehensive and Collision coverage are optional auto insurance policies that protect your vehicle.

Liability insurance, on the other hand, is required by law to cover the costs of injuries, fatalities, or property damage caused by you or another driver while operating your vehicle.

4. Ways to pay less for auto insurance

There are a number of ways to reduce your insurance costs. Sometimes this means cutting back on coverage. For instance, you may want to reduce your comprehensive coverage for an older vehicle.

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Another way to save money is to increase your deductible, which is the amount you pay before your insurance kicks in. If you can afford the higher deductible, you may be able to reduce your premiums. According to the Insurance Information Institute:

  • If you go from a $200 deductible to a $500 deductible, you could save 15 to 30% in collision and comprehensive coverages. If you go to a $ 1,000 deductible, you can save 40% or more.

Many insurance companies offer discounts based on factors such as low miles, multiple vehicles, safe driving (no moving violation in 3 years), and good grades for students. You can also get a better deal by combining auto and homeowner’s insurance with one company.

5. Allow someone to operate your vehicle, and in the event of an accident, your insurance company will cover the costs

As a general rule of thumb, auto insurance only covers the car and not the driver. When you lend your car to someone, you’re essentially lending them your car and your insurance policy.

Esurance’s vice president for product design. Unless it’s a life-threatening emergency or you’re driving under the influence, you need to consider the insurance consequences of letting someone else drive your car.

6. If you don’t renew your car insurance, it could end up costing you more in the long run

If you don’t plan on driving for a while, it’s easy to let your car insurance lapse and end up paying higher rates.

That’s because car insurance companies think the uncovered are more risky than those who stick to their policies. Even a day without coverage can cost you more.

So, if you don’t want to drive for a while, get in touch with your insurance company to see what you can do.

7. Personal auto insurance does not cover business use of your vehicle

Most policies don’t allow you to drive a personal vehicle for business purposes. Many insurance companies will cut your policy short if they find out you’re doing this.

People need to know that if they’re doing any kind of side hustle, like pizza delivery, messenger, or ride-share driving, they need to be covered because if they get into an accident, they could be responsible for everything.

Ask your insurance company if you can get an “endorsement” for your policy for business driving.

Ride-share drivers, like Lyft and Uber, have good coverage from ride-share companies when they have a passenger in the car. It’s when they’re driving around waiting for another rider that they’re at risk.

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The added coverage that a business use endorsement provides is reasonable, usually between $10 and $20 a month (according to a survey conducted by NerdWallet).

How to get the best price on auto insurance

Insurance is a purchase like any other, and the best way to get the best price is to compare different insurance companies.

Each insurance company has its own underwriting policy, which leads to different pricing. You can do this by going to websites like InsuranceQuotes and Esurance and comparing policies side-by-side.

Insurance rates fluctuate, sometimes by tens of thousands of dollars annually, depending on the insurer you choose, a senior research analyst at Insurance Information Institute (III). You want to find a company that has good ratings, good rates, and good service.

If you already have auto coverage, Consumer Reports recommends doing a rate review every two to three years. By looking beyond a few insurers, you’ll have a better chance of saving money.

You should also shop around whenever your life changes, such as when you get married, get divorced or move to a different home or apartment.

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