Car Insurance: Your Questions Answered
Though going without it really isn't an option, car insurance isn't always the easiest subject to understand. To interpret your options and get the best deal, you need a basic understanding of how it functions and what to expect from your auto insurance company.
Since education is your best defense when it comes to buying auto insurance, InsureMe would like to answer some common questions on the topic. We hope you find this information useful as you search for the right car insurance policy.
Why do I need auto insurance?
You need auto insurance for a variety of reasons. First, though each state determines its own coverage requirements, drivers in every state must carry proof of some type of auto insurance in order to drive. Second, auto insurance protects you from financial and legal obligation when you're involved in an accident. Depending on the situation, the coverage you choose and your state's insurance system, it may cover your expenses, those of the other party—or both.
What kind of coverage is included?
Auto insurance includes three broad coverage categories designed to protect you from loss.
- Property coverage: Pays for damage to or theft of your car
- Liability coverage: Covers others against bodily injury or property damage
- Medical coverage: Pays the cost of treatment, rehabilitation and sometimes lost wages and funeral expenses due to an accident
How can I find out which types of coverage my state requires?
Contact your state department of insurance, or read up on state laws at the Insurance Information Institute. On this page, you'll find comprehensive requirements listed state by state.
What determines my auto insurance rates?
Your premiums are based on how much risk you present to your insurance company; what it costs your insurer to conduct business, and how much money your insurer estimates it will need to pay all claims during the year. To best determine these answers, your insurer examines such factors as your age, the make and model of your car, your driving record, what kind of driving you do most, where you keep and drive your car, and even your credit rating.
Why do insurance rates vary so much from one company to another?
Depending on each insurer's claims history experience and cost of doing business, rates are set independently—and can vary widely. This is why it's so important to get several quotes before deciding on the right policy.
Is there anything I can do to reduce my car insurance rates?
Absolutely! Here are a few strategies you should discuss with your insurance agent:
- Establish a safe driving record
- Take advantage of money-saving discounts with credits such as defensive driving, driver training, anti-theft, low mileage, multi-car and long-time renewal
- Choose a higher deductible and pay more expenses out-of-pocket
- Drive safer cars
- Eliminate unnecessary coverage, taking into account your car's age and condition
- Look for group rates through employer-, credit union- or association-sponsored auto insurance programs
- Get several quotes and compare policies
Can my insurance company cancel my policy once I buy it?
Yes, but only if you don't pay your premium or your license is suspended while your policy is in effect. However, if either of these happens and your policy is cancelled, you're entitled to at least 30 days notice and a refund of the unused premiums paid, minus the cost of cancellation.
Can other people drive my car and still be covered?
Definitely! Since your auto insurance coverage is attached to your car rather than just to you, anyone who drives your car with your permission should be covered. However, check with your insurance company for more specific details.
Does my policy provide coverage when I rent a car?
Yes, most auto insurers today cover rentals under your standard auto insurance policy. However, if you also purchase insurance from the rental car counter when you go on a trip, that rental policy automatically supersedes your auto insurance policy. So make sure you know for sure what's covered before you purchase any additional, short term coverage.
What should I do if I have an accident?
Get a copy of the police report, take down the other party's insurance information, and call your insurance company right away. Your agent can help you determine whether or not you should file a claim, depending on the situation.
If you have a camera handy, you may also want to take pictures of the vehicles involved for later proof of damages.
If I'm not at fault in an accident, will my premiums rise anyway?
If you have a good driving record with no history of accidents, it's unlikely that your premiums will increase solely due to one incident. However if the opposite is true, your insurance company may assume you're a hazardous driver and increase your rates.
How much do speeding tickets affect my rates?
Although different companies have different practices when it comes to raising rates, many states have laws against raising premiums after just one ticket. So, depending upon state laws and the severity of the violation, your rates may or may not go up with just one ticket.
My teenager just got his license and, when I added him to my insurance, my rates went through the roof! What can I do?
Adding your youngster to your policy was the right thing to do because it protects both him and you in case of an accident. Unfortunately, you should also expect a natural rise in insurance rates until he is older and more experienced at driving. Meanwhile, encourage him to drive defensively, wear his seatbelt, avoid distractions and keep his grades up. These actions can provide worthwhile discounts and help him establish a good driving record which, in turn, helps keep insurance premiums in check.
A lot of people drive uninsured. How can I protect myself?
Uninsured motorist coverage provides the protection you need from those who carry no insurance. With this type of coverage, your insurance company reimburses you for bodily injury, medical expense or death from an accident caused by a driver with no insurance, the driver of a stolen car or a hit-and-run driver. It does not, however, cover damage to your car; you need collision coverage for that.
How do I choose the right insurance company?
Your goal should be to find an insurer with a stable history and a high level of customer satisfaction. Check out their ratings at independent sites like A.M. Best or Moody's Investors Service, or contact your state department of insurance, which can also furnish this information.