How Auto Insurance Works Today
Auto insurance is a contract between a person and an insurance company. In exchange for annual premiums, the insurance company agrees to cover all or most of the potential costs associated with a vehicle accident.
The premium to be paid is subject to the age, gender, driving experience, and history of the individual. Each insurance company calculates premiums differently. Nationwide, average policies can range from $75 to $200 a month per person for basic coverage, and over $300 for comprehensive plans.
Insurance companies require a deductible to be paid before the contracted policy kicks in. Deductibles are used by insurance providers to restrict their policies to cover only significant events. Other incidents have to be paid by the vehicle owner.
For example, an insurance plan with an annual premium of $3000 may be tied to a deductible of $300. An incident with an estimated cost below or at $300 will be paid entirely by the policyholder.
A larger accident with a cost of $1600 will require the driver to cover $300, while the insurance provider pays for the remaining $1300.
Some insurance providers have separate deductible amounts for each of the items they cover in their auto insurance policies. Auto insurance policies with high deductibles usually have lower premiums, and vice versa.
Why You Need Auto Insurance
Protecting your assets is the main reason why you need auto insurance. Vehicle accidents are a common occurrence, and auto insurance is the most reliable form of financial protection against physical damage or potential liability.
Compliance with local financial responsibility laws also makes auto insurance necessary. Lastly, if you asked for a loan to purchase a vehicle, the lender or leaseholder will demand that you also purchase auto insurance to satisfy their lending policy.
How to Get the Best Car Insurance Rates
Getting the best rates is achieved through a balance of several factors.
First, remove coverage that you consider unnecessary, such as rental reimbursement or uninsured motorist property damage.
Second, make sure your liability coverage is enough to pay for the potential costs of an accident in your state.
Third, look for a balance between deductible amounts. Raise those you may not have to worry about.
Lower those you think would become an issue when filing a claim.
How To Shop Online For Cheap Car Insurance
The Internet is filled with hundreds of websites offering cheap auto insurance without sufficient coverage or shielded by high deductibles. Although they look attractive at first, signing up for one of these policies could be a waste of money. Luckily, there are a variety of tools that help customers sift through the car insurance market to find the solution that suits them best.
The first of such tools is the A. M. Best Rating. It filters insurance providers by their financial stability. The better the rating, the more likely the insurance company is able to cover the costs of a claim.
This helps determine if the benefits of an attractive policy will eventually be of use during an accident. If your insurance provider is unable to pay for a claim, whatever coverage it offers becomes irrelevant.
The Department of Insurance and Better Business Bureau (BBB) also offer comprehensive information on insurance companies and their financial reliability.
Websites that compare auto insurance quotes are another convenient tool at your disposal. In general, most insurance companies have the option to calculate insurance quotes on their websites. The benefit of third party websites is their ability to visualize and compare similar policies from different providers.
When shopping for cheap insurance, comparison tools can help you save hundreds of dollars in premiums while getting similar coverage for your vehicle. The most comprehensive websites allow you to create a custom package and search their database for policies that match.
As a general rule, customers should always request at least three quotes from different providers and avoid focusing on popular insurance companies. They have invested heavily in advertising and often try to recoup those costs through higher premiums and deductibles.
Keep an eye out for discounts, good-driver, and clean record rewards before settling down with a specific policy. If you participate in a federal assistance program, ask for any applicable discounts or subsidies you may be eligible to receive.