Insurance
Understanding Insurance Will Help You Choose the Right Policy
Auto insurance is insurance purchased for cars, trucks, motorcycles, and other motor vehicles. Its primary use is to provide protection for the buyer against losses incurred as a result of traffic accidents and against liability for injuries and property damage that could be incurred in an traffic accident.
Premiums are usually derived from calculations based on statistical data. A premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims. Those factors include car characteristics, coverage selected, the profile of the driver and the usage of the car.
Gender
Statistically, men average more miles driven per year than women do, and have a proportionally higher accident involvement at all ages. Insurance companies cite women’s lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex.
Age
Teenage drivers who have no driving record will have higher car insurance premiums. Some insurance companies classify these younger drivers in a category referred to as “Assigned Risk”. However, young drivers are often offered discounts and affordable car insurance quotes if they undertake further driver training from recognized “driver education courses”. Many insurers offer an “academic” discount to students with a good academic record and “resident student” discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.
Marital Status
Drivers who are unmarried are often charged higher insurance premiums as opposed to married drivers. Statistically, unmarried drivers average more miles driven per year than married drivers do and as such are placed in a higher risk bracket.
Vehicle Type
Owners of sports cars, muscle cars, some sport utility vehicles, and motorcycles tend to have higher insurance premiums as opposed to compact cars or luxury cars. However, in the case of motorcycles, the chance of causing extensive damage to other vehicles is relatively low (as opposed to damage to oneself) and thus liability insurance premiums are often lower.
Use and Distance
Some car insurance plans do not differentiate in regard to how much a covered vehicle is used. However, methods of differentiation would include “Reasonable estimation” which relies on a reasonable estimation of the average annual distance expected to be driven to and from work and around town which is provided by the insured. This discount benefits drivers who drive their cars infrequently but is based at the discretion of the insurance company since it is unverified.
Types of Auto insurance
1] Liability Coverage
Liability coverage is offered for bodily injury or property damage for which the insured driver is deemed responsible. The amount of coverage provided will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.
2] Full Coverage
Full coverage is the name commonly referred to as Comprehensive and Collision. The insurance companies want to get away from the term because there is no such thing as full coverage.
3] Collision Coverage
Collision coverage provides coverage for an insured’s vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until your car is paid off. Collision Damage Waiver (CDW) is the term used by rental car companies for collision coverage.
4] Comprehensive Coverage
Comprehensive coverage provides coverage, subject to a deductible, for an insured’s vehicle that is damaged by incidents that are not considered Collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of Comprehensive losses.
5] Uninsured/Underinsured Coverage
Underinsured coverage provides coverage if an at-fault party either does not have insurance, or does not have enough insurance. In effect, your insurance company pays your medical bills, then would subrogate from the at fault party.
6] Loan/Lease Payoff Coverage
Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called “upside-down” or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a “gap” exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. These policies are often offered at the auto dealership at a comparatively low cost add on that can be put into the car loan which provides coverage for the duration of the loan.
7] Towing Coverage
Car towing coverage is also known as Roadside Assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.
8] Personal Property Coverage
If personal items in a vehicle are damaged due to an accident that would not be a covered under the auto policy. Any type of property that is not attached to the vehicle should be claimed under a homeowners or renters policy.
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