Paying premiums for car insurance can be frustrating. However, when you need it, you will be very glad you have it. There are around 5.25 million car accidents on American highways every year. Road conditions, other drivers, distractions, wildlife, and much more can cause an accident that results in property damages and medical injuries.
Auto insurance provides coverage to repair or replace your car. If you are at fault for an accident, your auto coverage pays for repairs to other cars involved along with medical costs associated with the accident. A single accident could result in millions of dollars in liabilities. Having proper and current insurance is critical to protect yourself and others. However, every policy is a little different. How can you tell the difference between a cheap policy that’s slim on coverage and an appropriately priced, thorough policy?
Here’s what you need to know about shopping for auto insurance:
Know the Difference Between Types of Coverage
Under the auto insurance umbrella, there are several different types of coverage. Each policy is configured to provide different types of coverage and different amounts of coverage. Car insurance is often referred to as ‘full coverage’ or ‘liability coverage.’ To have full coverage auto insurance means your policy includes liability coverage, uninsured motorist coverage, comprehensive coverage, and collision coverage.
Liability Coverage
Liability coverage is the bare minimum required by law in most of the U.S. Essentially, it covers property damage and medical costs when you are at fault for an accident with another driver or object. If you rear-end someone at a stop sign and mangle their bumper, this policy will cover repairs for their vehicle but not necessarily for yours.
Collision Coverage
Collision coverage will cover the cost of repair or replacement for your vehicle when you are involved in an accident. If you financed your car with a bank or credit union, you are required to carry collision coverage to repay the loan if something happens to the car.
Uninsured/Underinsured Motorists
While all drivers are legally required to carry insurance, there is no stipulation for the amount of insurance is required. Additionally, there are often drivers on the road who have let their policies lapse or who may not have purchased liability insurance. If you’re hit by an uninsured or underinsured motorist, this type of coverage will help pick up the tab for the difference.
Comprehensive Coverage
Comprehensive coverage is a perils policy that provides additional protection for your car. It can cover the cost to remove dents from a hail storm, damage caused by a deer, or theft. If your car is damaged by a riot, natural disaster, or wild animals, comprehensive coverage kicks in to protect your investment.
Medical Payments Coverage
Medical coverage will pay for the treatment of injuries sustained by you or your passengers in an accident. These costs could include doctor’s visits, surgical procedures, extended hospitalization, ambulance fees, funerals, etc.
Choosing the Right Coverage Levels
How much and what type of coverage you need depends on several factors. How much you can afford and how much risk you are willing to assume are key factors in deciding coverage type and policy limits.
Budget
We tend to focus on the price tag when choosing auto insurance. While it’s important to make sure you can afford your monthly premium so coverage doesn’t lapse, you might be setting yourself up for a bigger loss if you choose bargain-priced policies that lack appropriate coverage levels. Consider the average cost of a trip to the emergency room. Is your medical coverage limit enough to cover the number of passengers you typically have? Avoid making policy decisions based on the cost and focus on what’s covered instead.
Amount of Coverage
The amount of coverage you choose is important. The last thing that you want is a lawsuit because you hit a driver caused causing extensive injuries and the medical costs exceed your policy limits. The coverage you need depends on the type of car you drive, how frequently you drive it, and your financial situation. The bottom line is that if you can’t afford to replace it out of pocket, you need to protect it.
How Can You Get a Better Deal?
Comparison shopping can be one way to get a good deal. However, focusing on the metrics insurance companies use to determine individual risk may have a bigger impact on lowering your rates.
Type of Car: Older cars are less valuable and comparatively less expensive to insure. Similarly, high-end sports cars that cost two or three times as much as the typical family sedan will cost more to insure. If you want cheap insurance, stick with modestly priced used cars.
Driving Record: It’s pretty simple; good, attentive drivers have fewer accidents. If you have a history of speeding tickets and accidents on your driving record, expect your insurer to dial up the risk factor for your individual policy. This is one reason why younger drivers get saddled with higher premiums.
Credit Rating: Auto insurance companies have been using personal credit scores to profile drivers. This is based on the idea that someone who pays their bills on time is a generally a responsible person and likely a responsible driver. On the contrary, an individual who maxes out credit cards and defaults on loans is likely a bigger risk.
Where You Live: Geography matters when it comes to your car insurance rates; if you live in a heavily populated area with lots of traffic or in difficult terrain like the mountains, your risk is higher than a person who lives in a small rural midwestern area.
The Bottom Line on Purchasing Car Insurance
Carrying certain forms of car insurance is legally required for most drivers. Liability coverage and uninsured/underinsured motorists coverage are typically the legal minimums. Drivers who are caught on the roads without appropriate insurance coverage may lose their license or have to pony up for big fines. The minimum level of coverage increases if someone else is financing your car. In most cases, full coverage is just a good idea for all drivers. Since every policy is different, work with an experienced insurance broker to find the best coverage to suit your needs. Contact Carolinas Insurance and Investment Group today and let one of our knowledgeable advisors help you with these important decisions.
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