Understanding Auto Insurance

It would be helpful if when trying to purchase auto insurance for the first time there was a starter’s package that would come with a huge explanation and guarantee you are purchasing exactly the correct coverage for the cheapest price. Unfortunately, this does not happen! New patrons to auto insurance coverage are required to learn on their own the ins and outs of auto insurance. Whether the time has come that your parents have kicked you off of their policy or you are a new driver purchasing your own policy, we can help you figure out auto insurance by explaining the terms, what is generally offered, and how to keep the price low.

While most auto insurance companies work the same and offer the same services, some of the particulars in each company may be different. It is very important to know the details of the terms that apply with any auto insurance company, so do not just assume that one company’s offering mirrors another. Any time you have a question regarding a specific coverage or understanding a policy, feel free to search our site for answers followed by contacting your insurer. Listed below are topics that are generally misunderstood by new auto insurance customers. We’ll do our best to explain them to you and the importance of having them.

State Requirements
Yes, it is a law in almost every state that all drivers must have proof of financial responsibility to legally operate a vehicle on public roads. This form of financial responsibility usually is in the form of auto insurance. The purpose of this law is to demand that all drivers have a way to be financially responsible for any damages they may cause to another person’s body or their property. These liability insurances only apply to the other person’s injuries or property damage, not to the policyholder. Other types of insurance must be purchased and included in the policy for the policyholder’s injuries and property damage to be covered.

When looking at an insurance policy, it is often read as 25/50/25. These numbers reflect the amount the policyholder has purchased for bodily injury liability and property damage liability, and we’ll go over those definitions later. Keep in mind that the numbers used here are only for the example and your state may have different requirements. The first two numbers apply for the bodily injury liability purchased. In this case the 25 is representing a maximum amount, or limit, of $25,000 that can be applied to a single person’s injury expenses, with a combined total of a limit of $50,000 (the second number is 50) for all person’s injuries. The third number, again 25, represents the $25,000 limit the insurer will pay for any property damage, such as the damage done to the car you’ve hit. The insurance company will only pay up to these amounts, and more than the minimum requirement may be purchased by the policyholder if desired.

Bodily injury liability is what the policyholder purchases to have the auto insurance company pay for any physical harm that is caused to the other driver and passengers involved in the accident. This will cover their medical expenses as well as any death costs, loss of wages, and pain and suffering costs. Also, it applies towards any court fees if you are taken to court because of the accident. Again, the members in the policyholder’s vehicle are not covered here.

Property damage liability covers the cost to repair any property that was damaged in an accident. This can apply towards another vehicle, or a fence, pole, or other building structure or property. Any expense that exceeds the amount of property liability that is purchased will be the sole responsibility of you as the policyholder.

Additional Coverage
Some states call for additional coverage as part of their basic minimum requirements. Check with your state on what coverage and amounts they require. The following list those requirements, but if your state does not require them, it is still very worthwhile to look into them as they will provide you with more protection.

Personal injury protection is a coverage that is parallel to health insurance. This coverage will provide medical expenses to you and your passengers and policy members. Even if you already carry health insurance, personal injury protection may be valuable as it can provide a bigger cushion in preventing you from having to pay for your medical expenses out of pocket.

Uninsured/underinsured motorist liability is just as it sounds; it provides protection to you against drivers who have little to no auto insurance. When this coverage is included in your policy, your insurance company will pay whatever bills the other driver’s insurance did not pay. This prevents you from having to pay for someone else’s mistake to your property.

You may have heard about comprehensive and collision insurance before. These are not required by any state, but they are required by companies who loan you money to purchase or lease your vehicle. These two coverage options cover just about any other means of damage done to your vehicle, including theft, vandalism, weather-related damage. These amounts are usually determined by the cash value of your vehicle at the time right before the accident and are paid for after you have paid your deductible.

Keeping Auto Insurance Cheap
There are a few ways any driver can keep their auto insurance premiums low. First, as long as you remain a cautious driver and receive little to no traffic tickets or accidents, your insurance rates will stay as cheap as possible. The more you demonstrate you are a safe driver, the cheaper your rates will be. Also, brand new cars are more expensive to insure because they are more expensive to repair if the insurer ever needs to do so. Drive a modest vehicle that is a few years old. You can also receive discounts on your premium by taking driving classes or if you are a student by getting good grades.