Choosing the right auto insurance policy can be daunting, especially if you do not know how to go about it. Insurance terms are unnecessarily wordy and can lead to misconceptions. Most people think auto insurance is too complicated. Millions of customers make decisions on insurance without really thinking about it much.
One thing you need to understand is that paying for insurance is like paying for financial protection. So, how do you know which company to choose? First, you need to determine what you are looking for. Then, you should get many different auto insurance quotes before settling on one that best suits your needs. You also should read customer and expert reviews of the insurance providers you are considering. For example, you can check out some The General insurance reviews.
Rules Vary by State
The basic cost for insurance for your vehicle is based on its insured declared value. The value is derived from the market price of your vehicle according to the vendors. The value is not constant, as it depreciates with time.
By law, every vehicle on the road must have insurance or at least have liability insurance. This is to cover you and others in case of an accident. However, auto insurance is regulated at the state level, so the requirements vary from place to place.
Types of Auto Insurance Coverage
You may not know what kind of auto insurance to buy. If so, you are not alone. In fact, more than two-thirds of the people questioned in this study did not understand the difference between collision and comprehensive auto insurance. These two are optional, though liability insurance is a must.
Basic insurance should cover any property or bodily damage in the event of an accident. The insurance is rated in three separate areas: maximum property damage per accident, maximum bodily injury per individual, and other persons involved in the accident. For instance, let’s say you have basic liability auto insurance in the state of Arizona, which has a rating of 15/30/10. This means that your auto insurance will cover up to $15,000 for physical injury, $30,000 for other persons injured, and $10,000 for property damage.
Liability auto insurance is the minimum available, but you can opt for additional coverage. The quotes will vary quite a bit based on what level of coverage you want.
Collision auto insurance covers damage to your vehicle if you collide with another vehicle or object if it is your fault. It may extend to cover damages as a result of potholes or over-turning your vehicle. Comprehensive coverage protects you against damage or theft. This covers any incident separate from a collision, like vandalism, fire, weather, or even hitting an animal on the road.
Auto Insurance Underwriting Process
Every insurance company evaluates your coverage in a process known as underwriting. These are guidelines that your auto insurer employs when determining your coverage. The guidelines group drivers on different levels. Each level will have different premiums in relation to how risky you are as a driver.
Auto insurance companies do the underwriting process via computer software. The software rates you on the amount the company believes it might have to compensate you in the event of an accident. The software digs into your driving history in terms of previous driving violations and accidents. It also looks at previous insurance claims and how much they cost. These records normally affect your insurance quotes for three years, but some auto insurers may check even further back.
Your credit history may also come into play when you are looking for insurance. It may affect how much you will pay in terms of premiums.
Factors That Affect Rates
Auto insurance rates vary from one company to another. Each insurer uses its formula to determine how much to charge according to your risk assessment. The difference may cost you more, so it is good to have several companies to choose from. This industry is highly competitive, so shopping around can help you get a more affordable policy.
Other factors that can affect your auto insurance premiums are where you reside, your age, your gender, and your marital status. Studies have shown that young males with little driving experience are highly likely to have accidents. Drivers who are married are less likely to file a claim. Whether you live in a rural or urban area also counts. Living in an urban area with a high rate of crime will increase your premiums. On the other hand, living in a low-crime rural area will reduce your premiums.
The cost of your vehicle will not always affect your insurance premiums. A more expensive vehicle may have a better rate than a cheaper one. For the best deals on auto insurance, shop around before choosing your policy.