The simplest definition of auto insurance is an agreement
between you and an insurance company to provide cover to your car against a range
of events which may result in financial loss to you. Such events include personal
injury damage to your car and damages caused to a third party. You have to make
regular payments to the insurer known as premiums over the agreed upon term and
during the scheduled periods. This could be monthly, biannually or annually.
Why do you need a car insurance?
A car insurance is a legal requirement by all states excluding New Hampshire. In the other states you will need to get the required minimum liability coverage to cater for other road users. It also helps you easily meet most of the cost arising from damage caused by the several risks insured. You need to understand the various types of coverage and the range of risks you are likely to face in your use of the car. While the national average can be useful in understanding his much you should commit to your coverage, you should rely on your own assessment of risks and research on the coverage suitable for you.
Types of car insurance
While liability insurance is the most common and in demand kind of insurance, there are several types of insurance you should also consider;
1. Comprehensive cover; pays for property damage resulting from
a non-accident related incident.
2. Collision cover; pays for damages arising from a collision in traffic.
3. Uninsured/underinsured cover. This helps protect you from
damage caused by someone with no or little insurance. It could either be bodily
injury or damage to your car.
4. Medical expense cover - this one helps you pay for you and your passengers medical costs whether you were at fault or not.
What determines the rates you are charged for insurance
Insurance companies use several factors to assess risks and
from their calculate the rates you are charged. How risks are evaluated varies
from one company to another meaning it is common to find differences running up
to hundreds of dollars for similar policies across different companies. Some of
the factors to used in the assessment are;
Driving record: aspects and issues like tickets,
DUIs and accidents make it difficult for you to get an affordable rate for your
Your vehicle's make, model and year decides the
rates of your insurance. Older models are more prone to accidents and will have
a bigger risk but the cost of insuring them is low compared to new luxury
Your age and gender are also used by some companies to judge your risk status.
Teenagers and male drivers are viewed as having a higher risk of accidents
compared to grown ups and women.
Your history of claims, the more claims you have
made from your insurance, the higher a risk you become.
The purpose of the vehicle and the miles you have
been driving are also another factor as they contribute to the likelihood of
you having an accident.
Benefits of insurance
If you are at fault, you can cater for damages and injuries resulting from the accident without having to pay huge sums of money from your own pocket in lawsuits.
If you have extensive cover you can cater for medical costs for you and your passengers, as well as any damage to your car without digging into your pocket and even in the case where the party at fault is underinsured.