How Does Car Insurance Works?





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Car insuranceIf you own your own car, you probably already know a little about car insurance. You may have Heard the words deductible or premium. But, do you truly understand the different parts of an auto insurance policy and do you know how to choose the best coverage?

Forty-seven states require that you have at least some kind of car insurance, so it's a good idea to know what the law requires you to have and what additional or optional coverage will help to protect you in the event of an accident.

Before purchasing auto insurance, you must Consider a variety of factors Including what kind of car you have, your driving record and the amount of money you are willing to pay. Understanding the simple basics of auto insurance will make you confident that the car insurance policy you choose will take care of your needs in the event of an accident.

In this article, we will walk you through the types of coverage that insurance companies offer and discuss possible insurance needs. Additionally we will look at what Affects the price of auto insurance, how to bring the costs down and how to understand the components of your policy.


Types of Auto Coverage

Everyone who drives needs car insurance. In fact, most states require it by law. When you buy car insurance, you are buying what is called a policy. Your policy is based on a variety of factors Including what kind of car you drive as well as what kind of insurance you want. Auto insurance policies are actually a package of different types of insurance coverage.

The first step in understanding an auto insurance policy is to learn the various types of coverage insurance companies offer. Some of this coverage may be required by your state and some of the coverage may be optional
  • Liability - This coverage pays for accidental bodily injury and property damages to others. Injury damages include medical expenses, pain and Suffering and lost wages. Property damage includes damaged property and automobiles. This coverage also pays defense and court costs. State laws Determine how much liability coverage you must purchase, but you can always get more coverage than your state requires.
  • Collision - This coverage pays for damages to your vehicle the caused by a collision with another vehicle or object.
  • Comprehensive - This coverage pays for loss or damage to the insured vehicle that does not occur in an auto accident. The types of damages the comprehensive insurance covers include loss is the caused by fire, wind, hail, flood, vandalism or theft.
  • Medical Coverage - Pays medical expenses Regardless of fault when the expenses are the caused by an auto accident.
  • PIP - Personal Injury Protection (PIP) is required in some states. This coverage pays medical expenses for the insured driver, Regardless of fault, for treatment due to an auto accident.
  • Uninsured Motorist - Pays your car's damages when an auto accident is the caused by a driver who does not have liability insurance.
  • Underinsured Motorist - Pays your car's damages when an auto accident is the caused by someone WHO has insufficient liability insurance.
  • Rental Reimbursement - This type of coverage will pay for a rental car if your car is damaged due to an auto accident. Often this coverage has a daily allowance for a rental car.
Many insurance policies combine a number of Reviews These types of coverage. The first step in choosing the insurance you want for your car is to know the laws in your state. This will tell you the minimum insurance you need for your car. It's good to keep in mind that, Just Because your state may not require extensive insurance, extra coverage may be worth the expense. After all, no one wants to be stuck with Thunderbird dollars worth of bills late is because of the auto accident.

Now, let's take a look at how to Determine your insurance needs.

Understanding Your Auto Insurance Needs

Just because your state requires a minimum amount of insurance does not mean that's exactly what you should purchase. In fact, most motorists purchase more coverage than Reviews their state requires so that they are covered for a variety of problems - not simply a fender bender. In order to better Determine your auto insurance needs, Consider Reviews These five guidelines:

Know Your State Laws

Remember that forty-seven states require that you purchase liability insurance. Liability insurance is what pays for bodily injury and property damage that you cause another driver. Fifteen states Including Florida, Maryland, Michigan, Massachusetts, New York and New Jersey also require that you buy Personal Injury Protection (PIP). This coverage pays for your medical expenses and lost wages in the event of an auto accident. Your insurance minimum will most Likely be determined by state law, but many people are encouraged to purchase more than is required.

Know Your Options


There are a lot of car insurance options; but knowing what you need the most Likely Will is the key to making sure you are appropriately covered. Do you want coverage for a rental car if your car is damaged? Do you want an extended warranty to pay for parts and labor if your car breaks down? If your car is leased, you will probably need gap insurance the which pays for the difference between what your insurer pays and what you owe on your lease if the car is completely totaled.

Know How Much Money You Want to Spend

If you know your state laws and have Examined your personal needs, you can now put together the different pieces of auto insurance coverage in one total policy. The first piece of the policy is almost always liability insurance. If you only have minimum liability coverage and you injure someone, their attorney can go after your personal assets. So, you need to know your assets and what you can afford to lose in the event of an accident. Many insurers feel that minimum liability is a gamble. In fact, that is why it is Often only a little more money for more protection. After all, if you do get into an accident, it is much better for the insurance company to be responsible than for you to be personally responsible. Remember to run through various scenarios such as if I totaled someone else's car, will my insurance cover it? How much will I have to pay out of my own pocket? The answers to questions Reviews These types of coverage will Determine what makes you feel most confident should an accident Happen.

Know Your Vehicle

If your car was totaled, would you be Able to afford to replace it? If not, you will want a comprehensive and collision coverage. The decision to buy this coverage is usually based on the value of your car. Guidelines usually suggest that if your car is worth less than $ 2000, it will not be worth it to buy the comprehensive and collision. If you own a $ 50,000 car though, it would most certainly be worth it to pay an extra $ 200 annually or so to insure that your car will be replaced if you get in a serious accident.

Know About Your Other Insurance

Many people do not Realize that of other types of insurance Including health insurance and homeowners insurance may pay for damages due to an auto accident. For instance, if you have a comprehensive health coverage, you probably will not need more than the minimum required Personal Injury Protection (PIP). Make sure you know what you already have insurance coverage so that you do not purchase unnecessary coverage.

The best way to figure out your own auto insurance needs is to examine potential policies and know how much you are willing to gamble. For instance, it may not be worth it to you to purchase collision insurance if your car is not incredibly valuable and would therefore cost less to fix than to keep insured. Auto insurance is simply about how much you are willing to pay out of your own pocket versus how much you want the insurance company to cover. Once you decide this, you're all set to purchase your auto insurance policy.

The Price of Auto Insurance
There are several factors that affect the price of auto insurance. Of course, prices vary by company and you should compare prices thoroughly before you purchase a policy. The first thing that affects your policy's price is, of course, what kind of car you drive. For instance, a sports car costs more to insure than a family sedan. If you purchase a vehicle that has a high theft rate, your coverage will probably be more expensive. Essentially, though, your coverage will be based on the value of your car.

Another factor that affects auto insurance costs is where you live. If you live in an area where there is a high occurrence of accidents or vandalism, insurance will cost more money. For instance, since more cars are damaged in urban areas than in rural areas, you will probably pay more for insurance if you live in a city.

How often you drive will also affect your insurance costs. The more you drive, the higher the chances you will be an accident. Drivers who have long-distance commutes will pay more than people who live near their workplace. Meanwhile, if you only use your car on weekends, your insurance rates should be lower than someone who commutes to work daily.

The final factors that affect the price of auto insurance have to do with who you are. Your age, sex, marital status and driving record are all taken into account when you buy an insurance policy. Accident rates are higher for drivers under the age of 25, so if you are young, expect to pay a little more. Also, accident rates are higher for young males and single males. It doesn't seem fair, but if you are an unmarried 19-year-old male, your insurance rates will definitely be affected. If your driving record is impeccable, though, your rates will be lower. Obviously, drivers who are prone to traffic violations or accidents will have to pay more for insurance than safe drivers.

If these cost factors are beginning to scare you, don't worry. There are several ways to keep your insurance rates down.

There are four main factors that can keep auto insurance rates down. See if you fall into any of the following categories. If you do, you may be able to save money on your car insurance regardless of the value of your automobile.
  1. If you are looking to buy a car, consider buying a car that "looks good" to insurance companies. For instance, insurance companies know what kinds of cars are prone to problems. They also know what kinds of cars are most often stolen. If you haven't purchased your car yet, find out what cars make this "good list" among auto insurers. 
  2. Most insurance companies offer discounts for a variety of reasons - for example, good students, having more than one car insured and accident-free driving are all worth a discount. Ask insurance companies about specific discounts that may be available to you. 
  3. Consider carpooling or using public transportation to get to work. The less you use your car, the less your insurance will cost you. 
  4. Finally, drive carefully! Insurance companies are not happy to insure accident-prone drivers, so the safer you drive, the less you will have to pay for auto insurance.
Remember, don't be afraid to ask your insurance company about any discounts they offer - it could save you a little cash.

Source : http://auto.howstuffworks.com/buying-selling/car-insurance3.htm 

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