Auto Insurance Information that Everyone Should Know

There is a lot of information to know about car insurance, but there is some key points of which all drivers should be aware. Where knowledge is power, this information will help you to save money and have all of the coverage that you need.

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Remember that there are factors beyond cost that need to be considered. You want a great company as well as a great price. And we have it all here in this guide.

The Biggest Factor to Affect Your Premium

The first piece of information that you need to know is how your rates are calculated.

While there is a variety of factors that can affect the cost of your auto insurance, the biggest factor that affects how much you pay is your risk of filing a future claim.

All of the other factors used to calculate your personal rate for coverage go back to risk. Your risk is how likely you are to file a claim. That claim can be for an accident, theft, or other loss from nature or man.

If you live in an area where the rate of car theft is high, then your risk of theft will be higher and your insurance prices will be higher. Similarly, if you live in Tornado Alley, you will have a higher risk of having a claim for wind damage, so your car insurance rates for coverage for that peril will be higher.

The single biggest factor that insurers use to calculate risk is your driving history, according to the specialists at the Insurance Information Institute. A clean record shows that you drive cautiously and carefully to avoid accidents.

Speeding tickets and at-fault accidents show that you drive recklessly, and your rates will be higher. Severe infractions like DUIs show that you are very likely to have a high-dollar claim, so insurers will only insure you at great cost, if they will even cover you at all.

It may seem obvious that past accidents and tickets will cause your car insurance rates to rise, but people still speed, drive dangerously, and break major driving laws. If you want low cost car insurance, the best way to get it is to keep your driving record free of tickets and accidents.

Credit Is Important

There are many factors that insurers use to assess your risk, and one factor that is not as well-known is your credit score. While not all states allow insurers to look at your credit score, most allow providers to look at your score as an overall assessment of your driving risk.

Insurers claim that statistics show that a credit score is a good indicator of how likely you are to have a claim in the future. Car insurance providers claim that the poor financial decisions that lead to a bad credit score also lead to poor driving choices on the road.

In short, a low credit score means that a driver is more likely to create an accident and cost the insurance company money. To combat this higher risk, insurers will automatically charge higher rates, even if all of your other factors are positive.

If you want affordable car insurance rates, then you need to pay attention to your credit score as well as your driving record. While insurers look at your credit and formulate their own insurance score, if your credit score is low, then your insurance score will likely be low as well.

Improving your credit can help you to get lower costing insurance, but the process takes time.

The Federal Reserve offers five tips, such as checking your credit history often for mistakes and paying off old debts, to help you to improve your credit and your car insurance costs.

Coverage and Limits

Another topic that many drivers need to have a firm understanding of is the coverage they need and in what limits. Too many drivers are underinsured, and they really are not covered for the majority of events that could occur.

First, too many drivers have liability limits that are too low. Liability coverage is the part of your policy that is required by most states, and it pays for injuries and damages that you cause to others. Every state has a minimum amount of liability coverage that you must buy, but such requirements are not advice on how much coverage is needed.

Drivers with just the bare minimum in liability coverage will not have enough coverage in the event of a serious accident that involves multiple vehicles, many people, and major injuries. The Insurance Information Institute recommends that most drivers have a limit of at least $100,000 in liability coverage for each individual and $300,000 for the entire accident. Furthermore, $50,000 to $100,000 in coverage to pay for damages to property is also recommended.

Next, drivers must also be aware of full coverage options, and most should buy those options. However, far too few drivers have the collision, comprehensive, and medical payments coverage they need, as full coverage insurance costs more.

Liability coverage will not pay one dime towards your injuries and damage to your vehicle.

If your vehicle is worth more than $1,000 and your health insurance will not pay 100% of your costs, then you need to have collision, comprehensive, and some sort of medical payments option.

Collision will cover your damages or the fair market value of your vehicle from a crash, and comprehensive will do the same for events other than a crash. If you live anywhere where you might suffer storm damage, theft, fire, floods, or even earthquakes and other natural disasters, then you need to have comprehensive coverage.

Additionally, medical payments insurance or personal injury protection will help with medical bills. Such coverage might even be a requirement in your state. If your health insurance coverage isn’t the best, then you should have some sort of option that will pay for medical bills for you and your occupants.

Finding Discounts

Once a driver understands exactly how much coverage is needed, it is time to try to lower the cost of that coverage with discounts. Discounts reward good driving behaviors and help to ensure their continuation, according to the New York Department of Financial Services.

Most insurance companies will give you all of the discounts you qualify for right off the bat as an incentive to sign up and drive well; it is not as if they try to keep the discounts from you.

However, most drivers leave it at that, feeling that they have all of the discounts they can get. Yet, every driver needs to know how to actively search out discounts that could be obtained, if a few steps are taken to qualify.

For instance, many insurers offer a discount once you take a safe driving course approved by your state’s Department of Motor Vehicles. You won’t qualify for the discount if you haven’t taken a safe driving course recently, and you may leave it at that.

However, you can easily find a class to take. Most are affordable and can even be taken online or in the classroom.

For a few dollars and a few hours of your time, you can get a 10% or higher discount off certain portions of your coverage.

In that same vein, most insurers offer a discount for anti-theft devices such as alarms and recovery devices. If your vehicle isn’t equipped with an anti-theft device, then you won’t get the discount.

Yet, you can get such a device installed on your vehicle in order to get the discount. There are even options such, as VIN etching, that allow you to get the discount for an investment cost that is much less than an alarm or LoJack.

How to Find the Best Company

Drivers should also be aware that insurance is not all about cost. The reputation of a company is just as important as cost; some would argue that it is even more important.

The National Association of Insurance Commissioners recommends that you find an insurer that is financially stable and has a good reputation for customer service. Then, you will always know that your insurer will be there for you in the event of a claim.

Your other option is to go with a provider that offers a really low premium but that likely won’t cover your claims. They will deny your claims, and stretch out the time frame with paperwork and poor communication until you pay the damages out of need and frustration.

The Best Way to Buy

Lastly, all insurance industry specialists will tell you that the best way to shop for car insurance is to get multiple quotes for coverage. Insurance companies really do charge widely different rates for the same amount of coverage.

The only way to know how much any insurance company will charge is to get a quote for coverage.

Get quotes for exactly the same amount of coverage and then you will see how much rates vary. You can also take into account different discounts and other perks, such as complimentary roadside service.

Check out the financial stability and customer service ratings of those providers that offer you affordable coverage using rating organizations and customer-based reviews. Choose those companies that have high ratings.

Then, you will have enough coverage, an affordable price, and an insurance provider on which you can rely.

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