Ask two motorists why they have auto insurance and what it really is and they will answer two different ways. The first will say, “I have it because I have no choice.” The second will respond, “I’m not sure what it really is, but I know that it costs too much and I don’t want to have to use it any time soon.”
Thus, the real value of auto insurance gets lost for the average American driver. Although delving into the world of auto insurance doesn’t sound like fun to most people, comprehending the basic theory of auto insurance coverage and its significance will help you plan for unforeseen losses and may save you money along the way. Review these handy auto insurance buying tips.
The Nuts and Bolts of Auto Insurance
Here are a few definitions of the five major components of auto insurance and how they affect you:
- Liability, consisting of Bodily Injury and Property Damage. These offer protection when you are involved in an at-fault accident causing injury to person(s) or property. Property damage signifies physical harm to automobiles in addition to actual property, like signs, mailboxes, and utility poles. Many states insist on a minimal amount of bodily injury/property damage (BI/PD) coverage. However, you can request higher limits. If you are at-fault in an accident and total your costly automobile, yet choose lower liability limits on your car insurance, you will be in charge of paying all out-of- pocket expenses for the resulting damage.
- Collision Coverage. This covers damage to your vehicle in the event of an at-fault accident. This includes a collision with a different automobile or property, like utility poles or road signs. Collision coverage almost always has a deductible and is likely to be mandatory if your vehicle has a lien against it. It also covers you in a hit-and-run situation, but remember that you will have to cover the deductible before the insurance will begin to pay.
- Comprehensive (commonly called Other-Than-Collision or OTC). OTC is valuable for paying for damage to an automobile in circumstances outside of an accident, such as theft, vandalism, fire, inclement weather, etc. This coverage will have a predetermined deductible. Collision and comprehensive coverage are jointly labeled “Physical Damage”. It may be a lender requirement if you are making payments on your automobile still.
- Uninsured Motorist Coverage (UM). Ideally, everyone should have sufficient car insurance and this type of coverage would be avoidable. Sadly, not everyone has auto insurance, even state-required minimum coverage. Uninsured motorist coverage pays when you are involved in a collision with an uninsured motorist. Limits can resemble liability limits, and is mandatory in a few states, in at least a minimal amount.
- Medical Payments. This covers realistic medical fees sustained by you or your passenger(s) in the event of an accident. The amount is per individual and is typically a specific predetermined monetary amount (such as $1,000). Each state has their own rules regarding medical payments coverage, so speak with an Dallas agent near you to make sure you are meeting the state minimum.
The above five types of coverage cooperate in the event of any accident to help get you back where you were before. Some may be obligatory, based on the state you reside in, while others, though not mandatory, should be weighed heavily since their role in your claim could be indispensable.
Who Should Be Covered
There are a number of basic premises that influence your car insurance requirements. The most significant question is who needs to be covered under your car insurance policy.
The answer creates the foundation of the kind of policy you will require. Reflect on the following:
- Who in your household drives your vehicle or another one in the household?
- Is there a chance that others not residing in your house may drive your vehicle?
- What about other motorist(s) and/or passengers involved?
Our vehicles are special, but people are much more so. You have to ensure that your insurance will adequately cover those who need covering. Higher liability limits, UM, and medical payment coverage are vital for this reason.
The What
In most cases, losing your vehicle would have a significant negative impact on your life, finances, and more. Without physical damage coverage, the vehicle’s replacement is entirely your responsibility.
The decision of whether or not to add physical damage coverage is yours, but should be based on one deciding factor: If you were caught in an accident and couldn’t use your car, would you be able to cover the out of pocket cost for a substitute?
Most people can’t come up with the money to purchase another vehicle if theirs is damaged in an accident. If you are one of these people, physical damage coverage is indispensable to your policy. Having this coverage will give you the money to fix or replace your vehicle. Think about adding coverage such as gap, rental vehicle, towing, and glass coverage to learn more of what may be helpful.
What Affects The Cost?
Car insurance premiums are based on a great deal of things, including:
- Driving record (and household driving records)
- Make/model of insured vehicles
- Where the automobile(s) is driven and/or parked
- Annual miles
- Credit report
- Age and marital status
- Coverage limits and applicable deductibles
- Claims history
While some of these are uncontrollable, others can be adjusted to help give you a more cost-efficient premium.
Is Saving Money An Option?
Saving money is possible, even for those who think it is not. Here are some frequent ways that policyholders make use of to lower their premiums:
- In some parts of the United States, a defensive driving class can save up to 10% on your annual premium.
- Ask about group discounts, depending on where you work, and volunteer, live, go to school, or play.
- Discounts are usually available for students with a high GPA or college students living out of your home but still in your household.
- Check your credit history often for mistakes that may make the score drop, since that will cause the premium to rise accordingly.
- Keep track of how long it has been since your last at-fault accident or ticket. After three years, you may be eligible for a good driver discount.
- Increase your deductibles to as much as you can realistically afford to pay in the event of an accident. Higher deductibles often significantly decrease the amount of your premium.
- Try to make use of multi-policy or multi-car discounts. This means, if possible, choose the same insurance company to meet more than one need (such as life, health, home, and/or auto together).
Request your free Dallas auto insurance rate quote right away, and discover how easy shopping for auto insurance can be.
