A Guide to General Auto Insurance

Auto insurance can be a confusing topic, so a guide to general auto insurance is a handy thing to have. Understanding all of the parts of a car insurance policy is the first step in finding car insurance coverage that protects your financial stability and personal well-being.

Numerous quotes for car insurance can be yours by using your ZIP code to search in the FREE box on this page!

From state requirements for auto insurance to the best way to get great rates, this guide to general car insurance will give you everything you need to know. Car insurance doesn’t have to be confusing, and it serves you best when you understand exactly how it works.

State Requirements

Every state in the U.S. has its own laws and regulations regarding insurance. Basically, you need to purchase at least the minimum amount designated by your state in order to be driving legally. There are four types of coverage that might be required in your state.

The first two types of coverage that are a requirement in every state cover your liability, or responsibility, if you cause an accident. The first is bodily injury liability; this pays for the medical treatment other people must get because you injured them with your vehicle. Each state requires that you purchase a minimum amount of coverage for each other person and a total amount to cover the entire accident.

The second two types of coverage might be required, and they are aimed at providing protection and financial compensation to you. The next type of coverage that might be required to legally drive in your state is uninsured/underinsured Motorist coverage. This covers you if someone else causes you injury, but they do not have insurance or their coverage is insufficient to cover your damage costs.

The last coverage that might be a requirement in your state is personal injury protection, or PIP. This coverage pays for your medical bills from an accident; it might also cover lost wages or funeral costs as well.

It is always very tempting to get only the minimum requirements for insurance in your state, but all experts agree that minimum amounts of insurance generally are not enough to fully protect you in the event of a big accident.

The Insurance Information Institute asserts that industry experts recommend no less than $100,000 in coverage per individual and $300,000 in coverage for an entire accident for liability coverage.

Optional Coverage

Optional coverage is also available to meet your insurance needs and, unless your vehicle is not worth much, you probably need to get optional coverage. The industry officials at the National Association of Insurance Commissioners determine that you can consider dropping optional coverage if your vehicle is worth less than $1,000.

The first optional coverage is collision. This coverage pays to repair the damages to your vehicle from an accident, regardless of who was at fault. It will also pay you the fair market value of your vehicle if it is totaled in an accident. Collision coverage also includes a deductible; this is an amount of money that you will pay towards fixing the damages. The higher your deductible, the less money collision insurance costs.

The second optional coverage is comprehensive. It pays for damages to your vehicle from events not related to a crash. Such events include having your vehicle stolen, hitting a deer, suffering damage from a falling tree limb, or your vehicle catching on fire, getting flooded, or sustaining damage in a storm. Comprehensive also includes a deductible.

Lastly, there is towing and rental car reimbursement. Optional coverage is important to purchase because the costs of an accident or other loss can quickly add up, and most people do not have the cash on hand to pay for repairs. Without optional coverage, you will have to pay for repairs out of pocket. Incidentally, if you owe on the loan for your vehicle, your lender likely requires you to carry optional coverage anyway.

How Your Rates Are Determined

Many people wonder how car insurance companies set their premium rates, and the factors that affect the cost of your insurance policy all go back to risk. Car insurance companies need to take in more money in premiums than they pay out in claims. The more likely you are to have a future claim, called your risk, the higher your costs for coverage will be.

Car insurance companies rate your risk based on a number of factors. Some factors are based on your past behaviors, such as your past driving record. If you have many violations, tickets, and accidents, then you are more likely to exhibit those same behaviors in the future.

Some factors that insurers use are based on statistics that deem how a set of drivers is likely to act. For instance, data compiled by the National Highway Traffic Administration shows that young, inexperienced drivers are involved in three times more fatal accidents than all of the other age groups.

Those statistics deem that young drivers are more likely to get into an accident, so a young driver’s rates for coverage will be higher.

In that same vein, other factors that influence the cost of insurance coverage based on statistics include gender, marital status, the safety and cost of the vehicle you drive, and your education level. One last factor that is based on statistics that are quite controversial is your credit score.

Insurers maintain that there is a correlation between bad driving and poor money management. Essentially, those will poor credit are statistically more likely to also be risky drivers, and their rates are higher.

Other factors that insurers use to assess your risk and set your premiums are those that increase the likelihood of suffering damage or a loss.

For instance, the area where you live is a factor, because some areas have a higher rate for accidents and car thefts than others. Similarly, how many miles you drive is also a factor, because the more you drive, the more likely you are to get in an accident.

Resources for Consumers

Consumers are not alone in their insurance endeavors; there are many resources for understanding car insurance or finding assistance with a complaint. One of the major resources is your state’s insurance department. This state government entity regulates the insurance industry in your state, and it also maintains a website for consumers to utilize.

With your state’s department of insurance website, you can research the background of an insurance company or agent, check up on their license, view the complaints received by various companies, and lodge a complaint yourself. The state can act as a mediator between you and your car insurance provider if they feel you have a valid issue.

Further resources for consumers concerning car insurance providers include the Better Business Bureau. On their website you can view ratings, see complaint resolution statistics for a company, and enter a complaint of your own. The Better Business Bureau will also act as a go-between for you and a car insurance provider if it deems that you deserve a remedy to a valid problem.

There are also financial ratings and custom satisfaction ratings so that you can view the reputation of an insurance provider. Ratings agencies such as Fitch Ratings and Weiss will let you know if an auto insurance provider is operating in the black, and ratings outlets like JD Power and Associates rate insurance providers in areas of customer service.

While you can’t affect these ratings at all, such as by lodging a complaint, you can use them to exercise the almighty dollar.

Only give your money to the best insurance companies with the highest ratings, and those that don’t follow suit will eventually fall by the wayside.

The Importance of Comparing Quotes

One last tidbit that should be in every guide to general auto insurance is the importance of shopping around and comparing prices. All drivers are different, and all car insurance companies are different, so rates between the two can vary by hundreds and even thousands of dollars.

When searching for car insurance, you generally apply for coverage with a company. That application will contain all of your driving history. The insurer will review it and give you a quote for coverage. This quote is the cost they will charge you for the coverage you specified on your application, if you agree.

A quote is an offer: It does not mean you have coverage, nor do you have to take them up on their offer.

You want to get as many quotes as possible as you attempt to find the perfect insurance company with the best rates for the coverage you need.

Where to Get Quotes

You can get quotes from multiple sources. You can walk into an insurance company and sit down with an agent for a quote, though this process is getting less and less common. Many people call car insurance companies to talk to an agent for a quote, and many car insurance providers offer call centers that are open 24 hours a day.

One of the most common ways to get quotes in this age of technology is through the use of the Internet. You can get quotes from each car insurance company’s personal website, or you can use quote comparison websites to get a lot of quotes.

Use this car insurance quotes comparison website right here by inserting your ZIP into the FREE search box now!