Auto Insurance

Auto insurance, which is often referred to as either vehicle or car insurance, is a process where you pay an insurance company a regular premium, who in turn will provide compensation should you occur a financial loss due to an accident. Every state requires you to purchase a minimum amount of auto insurance, which is intended to protect both you and others from any damage that may be caused by an accident.

A basic auto insurance policy will cover the following:

  • Bodily injury liability - this will provide protection for the driver, policyholder, or a member of the policyholder's family if they were to cause a bodily injury to someone else.
  • Property damage liability - if the policyholder, or someone else was permitted to drive a car, causes damage to another person's property, this type of coverage will protect you.
  • Personal injury protection (PIP) - should the driver, or the passengers, of a policyholder's vehicle become injured, this will provide coverage for cost of treatment and can also include loss of wages, the cost of replacement services, and funeral costs.
  • Collision coverage - if the policyholder's car is involved in a collision with another car, this will compensate for the damage. This will cover for the cost of repair to your car, minus the deductible, even if you are at fault for the collision. If the collision was not your fault, then your insurer will attempt to recoup the costs from the other driver's insurer.
  • Uninsured/underinsured motorist coverage (UM/UIM) - you may often find that when you purchase cheap car insurance, you are typically underinsured, in some cases this may mean that you do not have enough money to pay for any losses that are the result of being involved in an accident. This may also involve a hit-and-run driver hitting either you, or a family member, and this type of insurance is able to reimburse you for the cost of damages. This will also protect you if you were to hit a pedestrian.
  • Comprehensive coverage - this will typically provide coverage if you were to suffer a loss due to something other than a collision. This may include theft or damage caused by, for example, a fire, explosion, earthquake, or windstorm.

Many insurance companies will also offer numerous discounts which can help to convert your basic policy into an extremely low cost auto insurance policy. There are various ways to save money and these include:

  • Safety measures - this can include something as simple as anti-lock brakes on used cars
  • Save drivers discount - if you have gone for a period, typically three years or more, without any tickets or accidents you may qualify for a safe driver’s discount
  • Renewal discount - if you stay with the same insurer for a long period of time you may qualify for a renewal discount
  • Student's discount - if you're a student aged under 25, who is not married, and you meet the minimum grade requirements, you may qualify for cheaper auto insurance
  • Multiple policy rates - many of the larger insurance companies may be able to provide you with a discount if you bundle together several different kinds of insurance. This may include your auto insurance, life insurance and homeowners insurance from the same company.
  • Having a higher deductible - as with any form of insurance, the higher your deductible, the lower you can expect your premium payment to be. However, you should be aware that if you are involved in an accident you will initially have to pay more towards the expense.
  • The type of car you drive - this is a major factor in determining your overall auto insurance premium rate. Obviously, if you own an extremely expensive car you can expect your premium to be higher. In addition to this the actual size, and indeed age, of your car will be a factor in how expensive your premium is.
  • Having a good credit history - if you're someone who has a good credit history you may qualify for certain discounts.
  • Low mileage discounts - there are numerous insurance companies who are able to offer a discount to any individual who typically drives less than the average number of miles every year.

You should, however, be aware that your premium is likely to increase after you have been involved in an accident, although the actual amount of the increase will be decided by the auto insurance company. Furthermore, if you have a bad driving record you may often find that your insurance company may refuse to renew your policy. With that said, an accident that has been caused by drunk driving is far more likely to result in your policy not being renewed.

If for any reason you decide not to report a minor accident to your insurer, this may cause you problems at a later date. A prime example of this is if the other driver chooses to sue you, your insurance company may not provide cover due to the time lapse. You can never predict if you will be involved in an auto accident, therefore investing in a suitable auto insurance policy will protect both you and your family during an accident. It will also protect you from losing your license for driving without a valid insurance policy.

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