Whether you’ve been driving for years or are a new driver, car insurance protects you and other drivers on the road. It’s crucial to select the proper type of budget-friendly insurance that provides you complete protection and coverage no matter the level of damage.
The truth is that insurance policies can be confusing. With that in mind, we’ve decided to wrap up some of the most important things you need to know about car insurance, like what it is, why you need it, how it works, and what it covers.
With the basic information we will provide, you can better understand auto insurance and how to pick the best insurance policy that fits your budget.
Introduction to car insurance
Car insurance is a type of insurance that can provide you with complete coverage of costs caused by accidents involving the vehicle. This insurance covers the expenses of all kinds of damage made to your car, someone else’s property and vehicle, medical bills, and some parts of legal costs.
However, which expenses insurance will cover depends on your policy’s specifics. It’s essential to mention that most people typically opt for personal car insurance without knowing the specifics of the policy.
Personal auto insurance is limited in terms of coverage, and it can only provide you protection if you’re using a car only for personal use. Some types of personal insurance may not cover the damage expenses if you’re using the vehicle for commercial purposes like a ride-share provider or delivery services.
If you’re planning to do commercial business with your vehicle, you’ll need to pay for a commercial insurance policy.
How does car insurance work?
Vehicle insurance works identical to any other insurance policy, like health and property insurance. So, the first thing you do is pick a good policy with enough coverage that you want. As we already said, coverage levels of policies are different, and you need to pay attention to specifics.
Car insurance policies usually need to be renewed after six months, but you can find the insurance companies that offer longer policy periods. However, if you have a long or short policy, you need to pay the insurance premium regularly.
Typically, people can pay premium rates monthly or six months in advance. Most insurance companies offer a slight discount for paying their premiums in advance. If you’re involved in some vehicle accident, you first need to submit a claim to the insurance company and pay for a required deductible.
After paying a deductible, the insurance company calculates and pays for the rest of the expenses. It’s essential to know that deductibles reset after each claim.
Different types of car insurance and coverage level
It’s essential to know that there are different types of auto insurance, and they all have different coverage levels. As we already mentioned, the coverage level depends on the policy specifics and insurance companies.
We’re going to list three different types of car insurance and their coverage level.
Comprehensive car insurance
The level of coverage with comprehensive car insurance is very high. This type of insurance covers almost all damages that a person can’t predict, like glass breaking, theft, floods, vandalism, fire, flying and falling objects, and even animal damage costs.
Collision car insurance
Collision coverage can cover the expenses caused by contact with objects on the road and other vehicles. This type of insurance also covers the damage expenses due to car rollovers, but only if you’ve tested negative on psychoactive substances and alcohol.
Liability car insurance
This type of insurance is typically required by law, and all drivers need to have it since it covers the damage caused by you and your vehicle to other objects and people. For example, in case you accidentally hit a car at the stoplight, your liability insurance covers the expenses of property damage and medical bills of all the people in the car you’ve hit. It also covers the court costs if someone sues you for causing an accident.
The factors that determine car insurance rates
How high your insurance policy rates are will depend on various considerations. Here are some factors that typically determine car insurance rates:
- The features of the car
How old and functional your car is will determine the premium rate. Your premium rate will be significantly lower if your car has some safety mechanisms and security features.
- Driving record
If you have a clean driving record, the insurance company will offer you a discount. If you have a vehicle accident history, your insurance rate will be higher.
- Living area
Your insurance premium will be higher if you live in a town with a high accident rate.
- The type of coverage
Depending on what types of coverage you add to your insurance policy, the rate will be higher or lower.
Ideally, it’s best to pay more for a deductible to lower your premium rate. If you pay less for a deductible, the price of the premium rate will be significantly higher monthly.
Once you learn these basics, finding the best car insurance deal will be easy. Just think about what amount and type of coverage suit your needs, determine your budget, and research the insurance companies.