No one enjoys paying car insurance premiums; however, this is an investment that can save you a fortune in the event of an accident. Car insurance is a requirement in every state except for New Hampshire and Virginia. Uninsured motorists pay a fee to the state in Virginia, and drivers in New Hampshire can post cash bonds in lieu of insurance. Even though insurance isn’t mandatory, most drivers in those states purchase insurance because it’s more cost effective.
The cost of accident claims can be exorbitant. Bodily injury claims average $15,862 per loss, and property damage can also cost thousands. While many drivers just carry the minimum required coverage for their state, it’s often worth the investment to get a more comprehensive auto insurance policy. Here is a short look at how car insurance works, and why it’s such an important investment.
What Does Liability Insurance Cover?
Your auto insurance policy protects you from most of the costs of expensive claims in the event of an accident. If you’re determined to be at fault in the accident, your policy will include property damage liability and bodily injury liability up to certain coverage limits. If you’re still financing your vehicle, your lender will require you to also carry collision coverage until the vehicle is paid off.
One of the advantages of having insurance is sharing the risk with other drivers, and sharing the resources. Your insurance company will negotiate directly with the other parties’ insurance companies and will help you manage the costs of repairing or replacing your vehicle. If you’re involved in an accident, it’s important that you only exchange insurance information with the other parties and don’t admit fault or discuss any other details. Your insurance adjuster will contact you after the accident for the details.
Do I Need Collision and Comprehensive Coverage?
Collision coverage is required by your auto financing company until the vehicle is paid off to protect their financial interests. If you’re involved in an accident, your policy will cover the cost of repairing or replacing the vehicle. Comprehensive, often called “other than collision coverage,” can include other options such as towing and medical expenses. It can also pay for damages done to your car in the event of natural disasters or vandalism, and replace the vehicle if it is stolen.
If you’re at fault in the accident, you have more to worry about than the other driver’s problems. A comprehensive policy is a small additional investment that will help you out when you have that one really bad day behind the wheel. A 2021 report from the Insurance Research Council also estimates that one out of eight motorists is uninsured. The small additional investment in comprehensive coverage is great for your peace of mind as you share the road with far too many people who are operating uninsured vehicles.
What Affects My Insurance Premiums?
Insurance premiums are set based on schedules established by actuaries. Actuaries are professionals who place a financial value on risk based on statistical data. Your insurance premiums will be affected by the state you live in, your age, and the replacement cost of your vehicle.
Individuals who are considered to be statistically more likely to be in an accident generally pay higher premiums, and your risk will be reevaluated each time that your policy is up for renewal. Your premiums will often increase after you file a claim, or your company may drop your coverage if it no longer determines you to be a good credit risk.
Luxury vehicles and sports cars have higher market values and are more expensive to insure. Even if your car isn’t an expensive sports car, you could have to pay higher premiums if it’s on the list of frequently stolen vehicles. Hybrid and electric vehicles often qualify for car insurance discounts.
If you’ve restored a classic car or performed a lot of aftermarket upgrades, those upgrades might not be considered when setting the value of your vehicle. Be sure to check with your local car club to see if they partner with companies that specialize in insuring vintage vehicles.
Are You Covered If Someone Borrows Your Car?
When we go out with our friends, we often split up the driving responsibilities. The insurance policy covers the vehicle if someone else is driving your vehicle and will cover most of the claims that could happen while your friend is behind the wheel. This includes property damage and bodily injury claims up to your policy’s coverage limits.
If the damages exceed your policy limits, your insurance company might negotiate with your friend’s insurance company to cover the damages. If your friend is uninsured, you could be fully liable for all damages if they are at fault in an accident.
If you do routinely allow friends who aren’t on your policy to drive, you might want to review your policy to make sure that you’re covered. You can also exclude drivers from your policy to protect yourself from damages when someone takes the car out without your permission.
What Happens When My Kids Are in College?
You might be tempted to take your children off your insurance policy if they go away to college and don’t have a car, but this usually offers only modest savings. Your kids will want to use the car when they’re home for the holidays, and you’ll want to make sure that they’re covered. They might also get asked to drive someone else’s car, and you don’t want an expensive surprise when you find out that their buddy from the dorm didn’t have insurance.
What Is an Umbrella Policy?
The cost of settling insurance claims can be expensive. If you’re at fault in a particularly catastrophic accident, standard insurance might not be enough. An umbrella insurance policy provides coverage for large liability claims when your policy benefits are exhausted. Your umbrella insurance policy can cover both home and auto claims and begin to make payments after your primary liability policy limit is reached.
Why Car Insurance Is a Smart Investment
No matter how cautiously you drive, you’ll always be sharing the road with irresponsible motorists. Whether they’re texting, driving under the influence, or experiencing road rage, you want to be prepared for them.
Even if you’re not at fault, getting things back to normal after an auto accident is expensive and time consuming. It often involves scheduling repairs or shopping for a new vehicle. In some cases, it even involves going to court. Fortunately, you have your choice of several top-rated insurance companies that offer a variety of great products to help you take to the roads with true peace of mind.
The right insurance policy can help you get professional services as needed to expedite your claim and handle additional expenses such as towing, a rental car while your vehicle is being serviced, and medical expenses. Do yourself a favor and get a car insurance quote online now to protect yourself and your family and take to the roads with confidence.
