Beginner’s Guide to Auto InsuranceApril 14, 2017 9:02 pm
Could you give someone $3,000 right now and still afford your other expenses for the month? Rocky Mountain Insurance Information Association (RMIIA) says that in 2013, the average collision claim was $3,144 and without auto insurance This could be how much you owe if you get into an accident today.
The majority of U.S. states require auto insurance. So if you are a car owner, purchasing a policy that covers your needs should be at the top of your to-do list. The penalty for driving without insurance varies by state, however, a few of the most common penalties include suspension of driver’s license, vehicle registration suspended, receiving a traffic ticket for no insurance, and increased future insurance premiums.
Avoid the fines and protect yourself while you’re on the road by finding the right auto insurance policy for your needs. Reach out to a few providers today, using the tips below.
WHAT THE EXPERTS SAY…
We’ve teamed up with Certified Credit Union Financial Counselor (CCUFC) Karen Smith. She has compiled a few helpful tips for you to get started on your search for the right auto insurance policy.
Who needs auto insurance?
If you drive a car, you need insurance.
Things to take into account when searching for an auto insurance policy
Call or visit multiple insurance companies to find an agent you’re comfortable with. Speak to the agent about your needs and how their offerings match up, then get quotes from a few companies before deciding. Choosing an insurance company is as important as your choice in hairdresser or mechanic. They must be someone you trust and a company you are happy to revisit as your life and insurance needs change.
There is no ‘one size fits all’ policy. The offerings can be tailored to you, so if you can only afford a small deductible, or would like extra coverage then your agent can work with you to find a suitable policy.
Although agents will earn a commission on some products, you are not obligated to purchase everything they offer you and you are entitled to ask whether a certain product or add-on is sold on a commission basis.
What coverages are most necessary?
Most insurance policies address seven elements of vehicle coverage:
- Liability: Covering the costs of repair should you be involved in an accident that is your fault
- Medical payments: This covers medical costs for passengers in the insured vehicle
- Uninsured motorist: Protects the insured owner of the vehicle and reimburses them for bodily injury or damage suits they would have against an uninsured motorist
- Collision insurance: Pays for the repair or replacement of your vehicle after an accident and usually carries a deductible with it
- Comprehensive insurance: Covers losses such as theft, collision with an animal, vandalism, hail damage, and fire damage
- Towing and roadside assistance: Cover the cost of summoning a tow truck or other assistance if your vehicle has a mechanical failure
- Car rental: Helps pay for the cost of renting transportation if your auto is unavailable because of repairs resulting from an accident or other extended repair
What factors will decrease/increase my insurance premium?
Rating factors are the basis for auto insurance premiums. Many factors can influence the amount of the premium, including:
- Driver’s age: Young drivers tend to have more accidents, so the premium is likely higher
- Driver’s gender: Young males tend to have more accidents, resulting in higher premiums
- Location of vehicle: A vehicle that is driven in an area that is statistically proven to have a higher or lower rate of accidents will have an influence
- Vehicle usage: Vehicles driven less than 100 miles a week often result in lower premium
- Driving record: Drivers with multiple tickets have a greater risk of accidents, so they will pay more
- Type of vehicle: Sports cars cost more to insure than sedans, reflecting the driver’s potential need for speed and other factors
- Coverage amounts: The higher the coverage purchased, the more it will cost
- Coverage Types: Obtaining full coverage for a vehicle costs more than liability coverage only, for example
- Deductibles: The higher the deductible, the lower the cost of coverages
- Use of discounts: Many companies offer discounts for having multiple policies with them, for having multiple cars insured with them, or for having young drivers who are “good students” with a grade point average of 3.0 or above. Other discounts may include accident-free, type of use, and safe-driver discounts
- Credit scores: The theory is that people who have bad credit are under the type of stress that is likely to influence their driving. Of course, it could also impair their ability to pay on time
HOW TO REDUCE YOUR AUTO PREMIUMS
It is important to consider your own situation when deciding which potential cost savings to pursue. However, the following are some suggestions to help retain the protection of auto insurance, while potentially reducing your outgoing costs.
- Increase the deductible to $1,000: This is most likely to be workable if an emergency savings account is in place
- Pay premiums annually or biannually: Some insurance companies offer a cost reduction if you pay for a longer period of time
- Drive safely: Good driving habits help reduce the likelihood of an accident
- Drop collision coverage on older vehicles: If your auto is only worth $3,000, it may not make sense to pay $500 annual premiums, for collision coverage
- Comparison shop: Some experts advise shopping for new coverage every three years, as many insurance companies increase your premium each year
- Take advantage of discounts: Ask if your insurance company offers discounts and provide appropriate documentation to prove you qualify. For example, if you work at home you may qualify for a discount for driving less than 100 miles per week for work purposes.
Below are a few questions to take with you to your meeting with your auto insurance agent. Continue to check back here as we discuss other types of insurance all consumers should consider.
QUESTIONS TO ASK YOUR AUTO INSURANCE AGENT
– What optional coverages should I consider?
– What effect does my credit history have on my insurance?
– Is there a separate fee charged for obtaining the policy?
– Are there discounts available?
– Can I still renew my policy if I’m involved in an accident or convicted of a motoring violation?
– Does the age of my vehicle have an effect on the policy price?
– What factors will decrease/increase my insurance premium?
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