The world of automobile insurance can be a bit daunting if you have never had any experience buying insurance or if you just never took the time to understand how it really works.
Of course, you can buy a policy without really understanding the ins and outs of auto insurance. In fact, you may have done so in the past. Automobile insurance companies make it so easy to buy insurance that you can just call up and have a new policy in 10 20 minutes. However, doing so without really having a solid understanding of your options could be costly and potentially very risky.
If you are looking to buy auto insurance but want to understand automobile insurance well enough first, here is a 5 point guide to how car insurance works:
1. The state or municipality where you live likely requires a minimum level of insurance coverage for legal compliance:
Your state (or province, city, county, etc.) likely has in place ordinances or laws which require you to carry a certain minimum amount of car insurance coverage. Often, the minimum required coverage comes in the form of liability insurance. This refers to the conditions under which your insurance company would cover the other party if you are involved in an accident that you cause.
2. To be adequately covered, you will probably need more than the minimum:
Of course, you will likely want to buy more than just the minimum amount of insurance required by law. Failing to do so could put you at great financial risk. If you have too little coverage for a given accident, you could be opening yourself up to being sued. Or, at the very least, you may be personally responsible for hundreds of thousands in medical and property payments for your party, the other party, or both.
In addition to liability insurance, the primary types of auto insurance coverage include: collision (covers your own property payments if the accident is your fault), medical payments (covers your own medical payments if the accident is your fault), and uninsured motorist (covers your medical and property payments if the accident is the other party s fault and they are uninsured).
3. Each coverage type available through a policy has 2 types of coverage limits:
For each type of coverage, you will have options for how much coverage you want to buy. These relate to:
a. maximum amount covered per accident
b. maximum amount covered per person (per accident)
4. There are also some types of coverage which are unrelated to getting into an accident:
In addition to automobile insurance coverage for accidents, you can also buy coverage for when you encounter non accident related vehicle damage or loss due to theft, fire, and other non accident related items. For these, you will have to choose a certain deductible amount, which is the amount you would have to pay before the insurance kicks in. The higher the deductible, the lower your premium.
5. Make sure you have looked into which discounts you qualify for:
Before shopping for automobile insurance, be sure to look into the types of discounts for which you can qualify. For example, having a good driving record, being a good student, having a high school or college degree, and belonging to certain professional organizations along with many others could help you pay less for car insurance.
Consider these 5 points as you approach comparison shopping for a new car insurance policy.
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