Getting your first car is great, but don’t think about driving it without car insurance. It is illegal to drive in the US without at least liability insurance, and if you hit somebody and have no insurance you can destroy your finances and even end up in jail. Since car insurance companies know that you need insurance the bigger companies spend millions of dollars bombarding you with ads to make you buy their insurance over the other companies. Talking lizards, pigs on skateboards and other silly ads are all designed to make you ignore the facts and instead buy insurance based on the funniest ad. This article will help you ignore the marketing foolishness and get the best deal based on what insurance you really need.
Before you can get a good deal on insurance you first have to know how insurance is priced. There are 6 types of coverage that car insurers bundle up into the price of an insurance policy, called the “six-prong” policy. Some people need all 6 prongs, but you may not need them all.
6 Components (“prongs”) of Insurance that make up an insurance policy
1. Bodily Injury Liability
This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else's car with their permission.
It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.
2. Medical Payments or Personal Injury Protection (PIP)
This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. PIP may also cover funeral costs.
3. Property Damage Liability
This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures hit by your car.
This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible.
This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer. Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.
6. Uninsured and Underinsured Motorist Coverage
This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver. Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.
Comparing Insurance Companies
When it comes to car insurance there are a lot of companies to choose from. Mega-corporations like GEICO, Progressive and State Farm spend millions on advertising, but there are over 450 other car insurance companies that offer deals that may be better. Now that you have a better understanding of what type of insurance you may need, you can start comparing companies based on pricing and service. A great place to start your research is the Insurance Information Institute . Simply select your state and type of insurance (“auto”) and you will get a list of available insurance providers.
Go to the website of each and find out more about each company. Once you narrow the list you can either fill out online quote information or you can request a quote by phone.
The Insurance Information Institute estimates the average car insurance rate in the United States is $789 per year, with pricing factors ranging from car engine size to personal credit history.
Be consistent. When getting quotes make sure that you use the same information every time. This is the only way to insure that you are getting an accurate price comparison.
Higher deductible equals lower payment. One of the biggest factor in pricing is the level of coverage and the size of the deductible. The deductible is the amount of money you pay out of pocket before the insurance company makes any payment. Picking a higher deductible amount means lowering your monthly payment up to 30%, but if you have an accident you will end up paying potentially thousands of dollars.
Reduce coverage on old cars.It may not be worth your money to pay for collision and/or comprehensive coverage on cars worth less than 10 times the amount you pay for the coverage.
Progressive's Name Your Price interactive tool allows users to visually and easily connect the dots between changes in policy price and the coverage they get.
There are less than a dozen “well known” or “popular” insurance companies in the US, but there are actually over 450 car insurance companies to choose from. A.M. Best Rating Agency
In 2011, the average car insurance rate in the United States is $789 per year. Insurance Information Institute
If you want to learn the lingo of the insurance industry, check out the American Insurance Association insurance glossary. The more you know the less easily you will be tricked into a higher policy.
It is illegal in every state to drive a car without liability insurance. You do not need to have collision or comprehensive insurance, just liability to be legal.
Car insurance rates are based on many factors including the zip code where you live, the size of car engine and your credit history. Because there are so many variables you need to get quotes from at least 3 different insurers to make sure you get the best deal.
The less you drive, the cheaper your insurance will be. Never overestimate how much you will be driving when you are providing information for your quote – that’s like throwing away money. On the flipside, low-mileage discounts can be up to 30%.
If you live in one of the areas that has many tornadoes, hurricanes or other large storms you need to purchase both collision and comprehensive coverage if you want to protect your vehicle from damages like falling tree limbs, hail, flood, and fire. One unlucky storm could destroy your car.
If you are a member of AAA you usually can get an additional 5% or more discount on car insurance.
The cheapest insurance policy is not always the best. How a company processes claims and availability of customer service are other factors that could influence your selection. Find out more by talking with current and former customers or contacting your state insurance department for information about consumer complaints.
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