How Car Insurance Works

Archive for the ‘Car Insurance Guides’ Category

There probably has been or will be a time when a relative or one of your friends wants to borrow your car.  You wonder if your insurance or theirs would cover them in the case of an accident, and how it would work if they were covered by your insurance.  These are never silly questions, and getting some answers is a step in the right direction.  Here are some car insurance tips about what you should know before you loan your car to someone.

Before you say yes to the friend or relative that asks if they can drive your car, it’s important to think about what kind of driver they are.  If you know the person well, this will make things easier, and if you have been in a car with the person before and can’t remember anything appalling, the person will probably behave responsibly and take care of your vehicle.  On the other hand, if the person who asks drove like a maniac saying things like “look, no hands,” or just who just drove with careless disregard for speed limits and vehicle spacing, loaning them your car probably isn’t a good choice.  Similarly, if you aren’t certain what kind of driver the person is or what their record looks like, don’t let them drive your vehicle.

When you are certain that you trust the person to drive your car, go ahead and call your insurance agent or company.  Ask them if your insurance will cover another person driving your vehicle.  Most likely when you first bought the insurance policy, the agent asked you if you wanted another driver added to your plan, a member of your family, for example.  If you already have the person added under your coverage, great; if not, the agent can immediately assist you in doing so.

If you don’t see this as a longtime arrangement and do not want to add the person to your insurance you can just ask the agent if your plan would cover another driver not already on the policy.  For the most part, insurance remains with the vehicle, but policies differ so you should definitely check to see what your representative has to say.  Remember that your original contract between you and the insurance company was established with your driving record, so if you let someone borrow your vehicle often they must be added to the policy.  On the upside, you can be sure that the driver will be covered if there is an accident.  On the down side, if you add another driver to your policy, you may experience a rate increase that correlates to the new driver’s record.

So, “how does auto insurance work when you loan your car to someone?”  Usually the insurance remains with the vehicle, and you are responsible for anything that happens when another person is operating your vehicle.  Most likely your insurance policy will cover the driver, but not all of them do, so it is best to double check to be sure.  Think twice before you let just anyone drive your car, because any claim you have to file will raise your premium.  Hopefully these car  insurance tips will help you become more informed on what you are covered for.

You are probably wondering,”how does car insurance work?” and what are the different types of car insurance that I should be looking for?  Well here are some basic car insurance tips and coverages that will enable you to better understand how car insurance works.  Use these car insurance tips to discover what you need in the type of car insurance you need.

How Basic Liability Car Insurance Works

Basic liability coverage is something, which is the minimum required by most states.  Basic Liability Only car insurance only covers damages made to others and their possessions.  The  coverage is approximately $50,000 for any, one person injured by your negligent driving, and $100,000 for everyone injured in the accident.

Generally it is advised to cover much more than the bare minimum required, as this is the most important coverage, and could expose you to risks of judgments and lots of legal costs.  Additional coverage, over the required minimum, will proportionately cost you less, because the rate at which the premium amount increases, is much less than the rate at which the coverage goes up.

Car Insurance Tips: Bodily injury liability should be thought of carefully as this cost can be much more than property damage in a serious accident. You can opt for a lower property damage coverage, but at least take $300,000 to $500,000 worth of personal injury liability.

How Uninsured Motorist Car Insurance Works

Another important type of coverage is the Uninsured Motorist Coverage.  This coverage will be of help when you are injured in an accident, and the other driver does not have any insurance, or has too little.

Car Insurance Tips: In such a case you will not be reimbursed of your medical expenses without this coverage.  It is advised to carry the same limit as your liability coverage.

How Personal Injury Protection Car Insurance Works

PIP or Personal Injury Protection sounds like the right kind of coverage for you and your family.  But in actuality it is not considered a wise choice, because it is limited and pays for a trip to the hospital, caused only by an automobile.  It is much better to have a good health insurance that will give you much better coverage, for treatment of any injuries caused in a car accident. If in your state, PIP is mandatory, then you can go in for the bare minimum.

How Collision Car Insurance Works

In regards to the vehicle, there is a collision coverage car insurance.  In this, the insurance company, will pay for the repairs or even replacement of the vehicle, in case of a collision. If you take a comprehensive coverage, then the company will have to pay for loss or damage to the vehicle, that is caused by any natural calamity, riots, theft, fire and so on.

How Deductibles in Car Insurance Works

In any car insurance policy, there will be deductibles.  This is an amount you have to pay before the insurance company gives out any amount of the comprehensive or collision insurance claim.  In the event of an accident you have to pay this deductible amount first, in order to get paid by the company.

Car Insurance Tips: Higher the deductible you are willing to pay, the lower will be your insurance premium.  So according to your need and requirement of risk coverage, you can set a deductible amount.

How Endorsements in Car Insurance Works

The remaining coverage is car insurance endorsements, which cover the cost of towing, accident-site labor and rental car expenses. The premium on these insurance policies are inexpensive, but you may not actually need it. I t is recommended to go in for an auto club like AAA for towing and labor.

There are many factors that will affect the price of a car insurance policy, so here are some car insurance tips for getting good rates.  It will depend on your requirement of risk coverage and also the law of the state.  You cannot avoid car insurance altogether, even if you do not want it.  Apart from the laws of the state, if you have a loan or installments remaining on your car payment you will need to take insurance for collision or a comprehensive policy.

Another major reason for having a high premium will be because of having a teenager in your family.  All insurance companies, regard teenagers as high risk drivers and need a high premium for their coverage.

If you are facing the wrath of the economic downturn, and you do not have much to spare, then you will need to get the bare minimum coverage required by law, in your state.  With the exception of New Hampshire and Wisconsin, every other state requires you to have liability insurance and the coverage amount varies as per the state.

The minimum liability usually has three coverages, which are, one person’s bodily injury liability in an accident, all people’s bodily injury liability injured in an accident, and liability of property damage of one accident.  Although there is no minimum limit set for bodily injury liability it is wise to purchase higher limits, because if someone else is injured due to your negligence and if the minimum liability coverage does not meet the medical expenses, the law might come after your assets.

On the other hand, if your assets do not amount to much, then you can stick to the minimum limits and save some cash.  There are many states that have made it mandatory for auto accident victims to collect medical or hospital expenses directly from their own insurance companies, regardless of who was at fault in the accident.  This is called No-Fault Insurance, and you will find many legal variations to it, and you can still sue the person at fault, if the amount of your expenses is above the mandatory amount set by the state.

You should not buy car insurance without comparing car insurance quotes, and you should carefully study what the different insurance companies are offering.  Before studying the different car insurance quotes, you should be clear, as to how much of risk you want to take on yourself.  For example if you already have a health insurance plan, you might want to purchase the bare minimum personal injury, protection coverage.  Also you do not need mechanical breakdown insurance if your vehicle is still under a warranty period.

Now let us see the different factors that influence the price of different coverages in a car insurance.  If you are going for a comprehensive coverage then if you own a car that is having a high theft rate, then your premium will be high.

For example, insurance for a sports car will cost much more than a family sedan.  Also, your coverage will depend on the cost of your car. Another factor will be the place where you live.  If you are living in an area, where there is frequent vandalism or accidents, your insurance is going to cost more.  Many insurance companies consider the mileage of your daily commute.  The more you drive the more likelihood of an accident, so you end up paying more.

Ultimately the main factors, that companies take into account is your age, sex, marital status and driving record.  As mentioned earlier the accident rate for a person below 25 is higher, and you end up paying more premium.  If, your driving record is excellent, and without any tickets or warnings, you will have a lower car insurance rate to pay.

If you are buying a new vehicle, and want to save on insurance costs, then find out the type of vehicles that insurance companies categorize in their “good list”.  All insurance companies are well versed in knowing the problems of different car models, from mechanical to the likelihood of it getting stolen.  So go for the ones which are the best models according to the insurance companies.