Even if you aren’t new to car insurance, it can still be a challenge to get that right amount of coverage. You want to balance your coverage so that it protects you if you are in an accident, but you don’t want to pay for more than what you need.
While every state has its own rules and laws regarding car insurance, the following are 9 important, general things to know.
Things To Know About Car Insurance
1. Price Determination
First, every insurance company will have its own formula and methods of determining its prices, but most factors are similar to one another.
For example, there are automobile-related factors, like how old your car is and the make and model.
They also look at demographic factors like your age, marital status, and gender. If you’re younger or a male, car insurance companies often think you’re more likely to be in an accident and charge you higher rates. Companies tend to think married people are less likely to be in an accident. Therefore they may get the benefit of lower rates.
Where you live is a factor. For example, if you live in an urban area, your rates may be more because there could be more crime, therefore more of a likelihood of your car getting stolen.
In some states, insurance companies can assess your credit score when they calculate your premiums.
2. There Are Differences In Collision And Comprehensive Coverage
A lot of people don’t necessarily understand the types of auto insurance or even what they have versus don’t have.
Comprehensive and collision coverage are typically optional, but they have different types of protection.
Comprehensive insurance is for things like damage from vandalism, hail, or a falling tree. Basically, comprehensive is for damage to your car that occurs outside of a collision.
Then, collision insurance is what you might more traditional think of as far as car insurance. It provides coverage if your car is damaged in a collision with either an object or another vehicle and you’re the at-fault party.
3. The Best Types Of Coverage Are Often The Cheapest
If you’re overwhelmed and don’t know where to start with car insurance, you should know that first, the coverage you legally have to buy is the most expensive. That is liability insurance. With liability insurance, if you cause damage or injuries, your insurer may end up having to pay hundreds of thousands of dollars.
While that’s the costliest, you can add on things like gap coverage and uninsured or underinsured motorist coverage, and you’re going to give yourself a lot more protection, but at a relatively low price.
Uninsured motorist coverage is a big one to think about.
4. Prices Differ Sometimes Significantly Between Companies
If you don’t think it’s worth the time to comparison shop between multiple insurance companies, you might end up paying a lot more than you should or have to. There truly are some pretty big differences when it comes to prices between companies.
No insurance company is going to charge the same thing for the same policy.
The difference can end up being hundreds of dollars.
There are a lot of insurance companies out there, and they know they have to be competitive.
5. You Have Options To Lower Your Costs
Along with shopping around and regularly making some comparisons between companies, you also have other options available to you to lower your car insurance costs.
You might reduce your coverage.
For example, if you have an old car, it may not be worth it to have comprehensive coverage on it.
You might also increase your deductible, but only if you would be able to cover the expense of higher out-of-pocket costs if you were in an accident.
You can also ask your insurer about available discounts, like a safe driver discount.
6. You Can’t Use Your Car For Business If You Have Personal Insurance
If you drive your car for business reasons, your personal car insurance policy may not cover you. You may even get your policy canceled if your insurer finds out.
This includes doing things like being a ride-share driver or delivering groceries. These gig jobs are very popular right now, but if you’re not covered, and you’re in an accident while you’re doing that, you might have to pay for everything.
What your insurance company might be able to do is get an endorsement on your policy that would cover you for your business use of your car.
7. Med Pay Picks Up Where Your Health Insurance Leaves Off
There is a type of insurance called Medical Payments, or Med Pay for short. With Med Pay, you’re covered and your passengers as well. Even your family members listed on the policy have coverage if they’re in another car.
Med Pay is designed to be used after your health insurance coverage has been exhausted and there are no copays or deductibles. Basically, it covers out-of-pocket medical expenses that your health insurance doesn’t.
8. It’s Going To Cost You If You Let Your Policy Lapse
If you don’t want to pay for insurance anymore, or you’re going to let your policy with your current company expire so you can switch companies, don’t just let your policy lapse. You need to let your current company know and you need to buy new insurance before your policy is canceled if you’re switching.
Otherwise, when you try to buy insurance again, the company is probably going to see you as risky, and they’ll charge you more—maybe a lot more.
9. Your Car May Affect Your Rates
Finally, this was briefly touched on above, but if you’re in the market for a new car, be aware that the one you choose might mean you pay more or less in car insurance.
If you opt for an expensive car, not only will your payment be more, but your insurance probably will be too. If you choose a luxury car that’s often stolen, again, you may pay more.