Car Insurance 101: Do You Know How You’re Covered?
Every car nationwide is required to have at least the state’s required minimum liability insurance.
If a vehicle is financed through any lender, they will likely require the owner to hold a certain amount of comprehensive and collision coverage on top of the state mandated liability insurance. It is important that drivers in all states know what type of coverage they need on their vehicles and what kind of discounts they are eligible for to keep rates low. Any driver who is educated on the different discounts on their car insurance will save hundreds of dollars every year.
Liability vs. Full Coverage Insurance: What is the Difference?
When your vehicle is covered with liability coverage, it simply means that if you are involved in an accident and you are found to have caused the accident, then your insurance company will pay the damages to the other party. Your policy will determine exactly how much of the damages they will pay. For example, if you have a policy that states there is 50/200/50, the insurance company will cover $50,000 per person in bodily injury, $200,000 per accident bodily injury (this is the total medical expenses for all people involved) and $50,000 for property damage. If the other party claims it cost $250,000 for total bodily injury and it cost $60,000 to replace their vehicle, you can be held liable for the additional $60,000 that is above your liability limits. This type of insurance is the basic level of coverage that is required by law although each state has different guidelines that pertain to the amount of liability that is held on vehicles.
Full coverage insurance, or comprehensive and collision, covers your own vehicle in the event of an accident where you are found to have caused the accident. This is a type of coverage that is often required by lending institutions to protect their investment should your financed vehicle be involved in an accident. In general, when you at fault in an accident, your insurance company will not pay for damage to your own vehicle unless you have full coverage car insurance, otherwise known as comprehensive and collision. This type of insurance will pay for your vehicle to be replaced or repaired, minus your deductible. Similar to the liability coverage, the policy will only cover the amounts that are stated in your policy.
The Truth about Deductibles
Deductibles are often the main thing that drives up insurance costs, but if you know how to manage them, you can often use the deductible to get your premium lowered. You will want to verify with your lender before you raise your deducible since many banks will have a limit on the deductible. Most banks will require that the deductible is no higher than $1000 or $1500. Once you know what your bank requires, then you can talk with your insurance company about what your deductible will do to your premium. In most cases, the insured has a very low deductible and a very high premium. When you raise your deductible to $1000 or more, you can expect to drop your six month premium by usually hundreds of dollars. The truth is when you purchase your premium the default deductible is often very low, and insurance companies sneak that number in. You can go in and change this at any time either through the insurance company website or through your agent.
Different Discounts That Help You Save Money
Every insurance company offers different discounts from multi-policy discounts, to good driving discounts, and even employee discounts. Possibly the greatest discount is that of the multi-policy discount. This discount takes into consideration how many vehicles you have on a policy, and if you have renters or homeowners insurance all on the same policy. Most companies, when you have auto and renters combined, the discount will make your premium lower than if you had just the auto insurance.
Good driving discounts are discounts that reward you for being a safe and accident free driver. For each year that you go without a mark on your driving record, you will be eligible for this discount which will vary from company to company. In line with the good driving discount is that of the good grades discount. This discount applies to drivers under the age of 25 who are currently enrolled in high school or college. When the student achieves a GPA of 3.0 or better, the premium they pay will decrease dramatically. Most parents require their children to maintain good grades so that they can afford to pay for their insurance since teenage drivers tend to raise the insurance premiums dramatically.
How the Car You Drive Affects Your Insurance
There is a stereotype that the newer your car the higher your insurance will be. With all of the latest developments in automobile safety and efficiency, many insurance companies are actually offering new car discounts. Insurance companies have a calculation they go by to determine how much it will cost to insure the vehicle. The main thing to remember is that two door coupes will always cost to insure more than a four door sedan and four wheel drive truck will cost more than a minivan.
There are many things that play into your total insurance cost. When you are able to determine what discounts you may be eligible for and what you can get away with having your deductible set at, you can proactively save money on an expense that is a requirement for all registered vehicles.
Kevin Beene has a background working in the auto insurance industry. He enjoys sharing his knowledge by blogging for a range of auto blogs and personal finance blogs. Visit www.cheapautoinsurance.org to see if you could get a better price.
Please Note: This article is posted by guest writer. We are not affiliated with any company or individual nor give insurance advice.