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 If you own or lease a car, auto insurance is a good way to protect that investment. In fact, leasing agencies and lending institution will usually require the purchase of an automobile insurance policy to protect their investment. After all, until that lease is up or the car loan paid off, those companies are partners with you.
Auto Insurance Policies
Since auto insurance companies have been regulated for a number of years, there is a lot of standardized terminology used in car insurance policies. That's good news for the consumer because it makes comparing quotes and policy coverage much easier.
Just like in a homeowners insurance policy, a car insurance policy has two basic categories of coverage - liability insurance and physical damage to property - especially the car. Let's take a closer look at how these policies are structured.
Automobile Liability Insurance
Liability coverage on a car insurance policy provides for the cost of paying for damages that you might have caused and if you are found to be at fault. Within auto policies, there are two basic types of liability coverage that you should be concerned with:
- Bodily Injury - The bodily injury portion of an automobile insurance policy protects the policyholder from claims and lawsuits by people who are hurt or pass away as the result of a car accident. This liability insurance portion of the policy pays for the personal / financial hardships the other party might be exposed to.
- Property Damage - You also need property damage liability insurance to protect you from claims and lawsuits brought by people that had property damaged as a result of a car accident that you may have caused.
Automobile Liability Coverage
The state that you live in has probably set a minimum value for the liability insurance you need to carry within a car insurance policy. This minimum coverage established by each state is for the protection of other parties that are injured.
The minimum liability coverage generally starts at around $35,000 and can go up to $500,000 on most standard policies.
Personal Injury Protection
The personal injury protection or PIP portion of your auto insurance policy pays for your medical treatment and the treatment of others that are covered under your policy. This is a form of a no-fault insurance coverage.
Personal injury protection is further divided into two types of coverage:
- Medical Expenses - The medical expense portion of this insurance pays for the cost of providing medical care including hospital stays, medical doctor fees, and rehabilitation of injuries.
- Non-Medical Expenses - The non-medical expense portion of your car insurance pays for things like income continuation, paying someone to provide essential services such as cleaning your house, and even funeral expenses.
PIP insurance protection ranges from $15,000 to as much as $150,000 on a standard car insurance policy.
Physical Damage Insurance
There are basically two types of physical damage insurance that an auto insurance policy will cover - collision coverage and comprehensive.
- Collision Coverage - This insurance protects you from damage that you cause to your own car in the event of a collision. For example, if you were to hit a tree or found to be at fault in an accident. You can also file a claim under your own policy for damages caused by others. In this situation, your insurance company would then file a claim against the other party's insurance company for the damages.
- Comprehensive Coverage - This insurance covers your car in the event it is stolen, vandalized, or otherwise damaged except for those things covered under collision. It's termed comprehensive because that's what it is - it covers all the other insurance protection you'd need for a car.
Comprehensive and collision coverage are subject to deductibles and the amount of insurance you need depends on the value of the car you're insuring. And this brings us to our final topic - how to compare auto insurance quotes.
Auto Insurance Quotes
If you're shopping around for insurance quotes, then you should be aware that not all car insurance policies are created equally. On the positive side, it's pretty easy for a car insurance company to place a value on your car.
Vehicle Identification Numbers
For a new car or used car, an insurance company usually requires you to notify them of the car's VIN or vehicle identification number. The VIN is a code consisting of numbers and letters that identify the car's make, model, engine option, assembly plant, and model year. Just by knowing a car's VIN an insurance company can accurately place a value on the automobile.
Factors Affecting Auto Insurance Quotes
We've already mentioned the types of coverage you can buy within a car insurance policy. When comparing quotes, make sure each insurance company is providing the same level of insurance. That is, the dollar values of coverage as well as deductibles are all consistent between policies.
Car Insurance Discounts
In addition, many car insurance companies offer discounts on insurance for the following:
- Good Student Discounts - A reduction in the insurance premium for students that rank in the upper 20 percent of their class, has at least a B (or 3.0) grade point average, or is on the Dean's list or honor roll.
- Car Safety Features - A discount on insurance premiums for car safety features including anti-lock breaks and air bags.
- Car Alarm Systems - Security features found in cars such as anti-theft devices reduce the likelihood of a car being stolen or increase the likelihood of it being found.
Factors Affecting the Cost of Insurance
Finally, there are several other factors that may affect your car insurance - increases or decreases to premiums - including:
- Where you live - Insurance companies use your address and match it against their statistics on car theft rates in your area.
- How the car will be used - Is the car be used for commuting to work or pleasure-use only? The more miles you drive each year, the higher the likelihood of an accident.
- Prior driving records - This can include prior accidents and the number of points on a license that can be attributed to poor driving habits.
- Credit Insurance Scores - the law allows insurance companies to develop what are called credit insurance scores and these scores can affect your insurance premiums. The rationale behind this policy is simply this - statistics show that individuals with poor credit are much more likely to file an insurance claim - which increases the cost to provide insurance.
About the Author - Auto Insurance
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