What To Know: A Beginners Guide To Purchasing Car Insurance

A Beginners Guide To Purchasing Car Insurance

When on a mission for a first-ever auto insurance policy, the amount of information available might be overwhelming. If that weren’t enough, auto insurance can be very costly, too, especially for new drivers. Centers for Disease Control and Prevention states that motor vehicle accidents are responsible for every one out of three deaths of teens between the ages of 16-19. That is largely why auto insurance for drivers in this age group typically costs more than for any other driver. Insurance companies structure their auto insurance rates in such a way that inexperienced drivers and those with less than stellar driving records pay rates that are higher than those of drivers with a clean driving history.

Teen Driver Statistics – Centers for Disease Control and Prevention’s website gives frightening statistics on accident rates for teenage drivers.

State of Utah – At this site for Utah Insurance Department, find info offered to parents of new drivers.

Why is car insurance necessary?

Before a vehicle can be driven on the road, it must have license plates. To receive them (sometimes called “tags”), drivers must register their vehicles with the motor vehicle department in their state of legal residence. To register a vehicle, most states require proof of insurance. Every state has its brand of what is sometimes called a “Financial Responsibility” law, which means that when a driver is responsible for an accident that causes property damage or injury to someone else, that driver must take financial responsibility for paying for those damages and injuries. An auto insurance policy is what allows drivers to pay for those claims. In most states, driving without proof of financial responsibility is illegal.

To apply for vehicle registration in New York state, for example, there must be liability coverage for that vehicle and a state of NY-issued insurance identification card. Arizona also requires proof of financial responsibility before a vehicle can be registered.

Why drivers need auto insurance – California’s state insurance department gears this information toward young drivers…great site.

New York State DMV – What are NY’s minimum liability requirements? Find out here.

Arizona Personal Auto Insurance – This state’s minimums are much lower than NY’s.

Coverage is Mandatory because… – Arkansas explains the answer to this.

What are the different kinds of car insurance?

Collision covers damages from colliding with another object, but also included is the overturning of the vehicle. Notice that collision coverage is not limited to collision with another vehicle. It could mean collision with a tree, or a telephone pole, for example. Thus, collision coverage pays for damage to your own car. If the vehicle is financed, the financing institution will require collision coverage. Comprehensive coverage is for damage to an automobile that is caused by fire, explosion, glass breakage, animal collision, and other incidents not covered by collision coverage including theft of the vehicle. Collision and comprehensive coverage are almost always joined as a single component of an auto policy. In other words, one of these coverages cannot be obtained without the other.

Liability insurance covers damages that you cause to others, whether bodily or to their personal property, such as their vehicle. Part of what determines the cost of an insurance policy is the maximum amount of liability coverage the insured person requests. This is called the policy’s liability limit. The amount of liability coverage should be adequate for protecting the policy owner’s assets. If a driver is found to be at fault in an accident that injures or kills someone, it is very likely that driver will be sued. If the liability limits on the driver’s policy are below the total cost of damages for which the driver is held responsible, the law may force the driver to surrender assets, such as the home or car, to pay for the damages. Future wages may be garnished, as well.

Here is an example of how liability limits are usually written — three numbers, and in this manner: 20 / 40 / 10. In this example, the maximum bodily injury covereage is $20,000 for a single individual, and the maximum bodily injury coverage per occurance or per accident is $40,000. The third number is the maximum the policy provides in property damage coverage, per occurrence, or per accident.

Most, if not all, states have minimum liability limit requirements which vary. Every insurance agency will know fully-well what the liability minimums are for their state. Occasionally, states do increase those minimums and agencies will notify their insurance customers. It is up to the customer, however, to be sure he or she carries at least the minimums required by state law. If a policy’s limits are below state minimums and that vehicle operator is stopped by an officer for any reason, the policyholder will likely be ticketed and fined. Those fines also vary by state.

While not every state calls it by the same name, most will require a type of uninsured/underinsured motorist coverage. This pays for your injuries and damage to your car if you are injured by a hit-and-run driver or by a driver who has no insurance and therefore cannot pay for these damages. This coverage protects you, your family members living with you, and passengers of your vehicle.

Uninsured motorists’ coverage is required in some states as an attempt to address the problem of accidents between insured drivers and drivers without liability coverage. Even though most states require liability insurance, Insurance Research Council reports that about one in every seven drivers at fault in an accident with another vehicle was driving without insurance.

Some states call it “no-fault” insurance; others might call it “personal injury protection,” or “PIP.” This coverage pays for the medical expenses of the driver and anyone else who is covered under the same policy.

Vehicle owners may wish to purchase policy limits that are higher than the state’s minimum requirements. There is also coverage available, which is not mandatory, that will provide coverage for alternate transportation while a vehicle is out of commission following a comprehensive or a collision claim. Also, coverage called “towing and labor” is available in case your vehicle breaks down.

State of Ohio – This state has the lowest requirements in the country for auto liability coverage.

Maine auto insurance – Maine has one of the highest minimum auto liability requirements.

Arizona – Find info on this state’s minimums for auto liability coverage.

Where do rates come from?

An insurance policy’s rates are based on the insured person’s sex, age, driving record, the year, make, and model of the vehicle, the location of the home address, and how the vehicle will be used (for instance, pleasure or business). The number of miles of the daily commute are factored in, as well.

Determining Factors – At this insurance department of South Carolina site, see what factors determine auto insurance rates.

When premium is higher than the quote – Find out here why this can happen.

Getting Started

It pays to shop around before buying insurance. When calling for quotes or searching for quotes on-line, have available the vehicle’s year, make, and model, the 17-digit VIN (vehicle identification) number, driver’s birth date, driver’s license number, and Social Security number.

FAQs – Questions often asked by insurance shoppers.

Different companies can offer noticeably different premiums. What is one way to keep premiums as low as possible? Avoid having accidents and traffic tickets! Each accident or infraction equates to points on a driver’s license that cause insurance companies to see that driver as risky and apply a higher policy premium. Stay away from sports or high-performance vehicles; they are very costly to insure. Another way to lower premiums is to increase the policy’s deductibles, which is the amount the policy holder must pay whenever there is a claim. An insurance representative can help in exploring those options.

Some auto policies offer comprehensive coverage at deductibles that are lower than those for collision coverage. With older vehicles, the cost of repairs may actually exceed the car’s value. In that case, it may be worthwhile to consider dropping the comprehensive/collision coverage. It may be worth asking the insurance representative these questions.

Many agencies offer auto policy discounts so it’s worthwhile to ask agencies what discounts they provide. Some will offer a discount to recent college graduates, participants in a drivers’ education course or to operators who are 55 years of age or older and have completed a safe driver course approved by the department of motor vehicles in that state. Other companies offer discounts for two or more cars on the same policy, and for vehicle safety devices that are factory installed, such as front and rear passenger airbags and anti-theft equipment.

Of utmost importance is this: DO NOT Drink and Drive! Driving Under the Influence, or DUI, for a number of states is .08 or above. Even a first offense can mean jail time in some states. It can be very costly, not only in premiums, but in human life.

Florida DUI laws – It isn’t worth it to drink and drive.

Shopping for Auto Insurance – this is New Hampshire’s state insurance department site where you’ll find tips on how to lower your auto insurance premiums.

What if I’m in an Accident!! – At the Texas insurance department site, you’ll find great instructions on what to do that might be very helpful.

What is No-Fault Insurance – This site from Michigan’s state insurance department gives a very good explanation.

 

This article is a resource created by Cheap Car Insurance meant to educate and raise awareness about how to purchase car insurance. Sharing is permissible. Please contact us if you have any questions. Get a car insurance quote in your area.