Of all the major insurance plans, auto insurance is one of the most confusing. So many people don’t understand their policies or don’t have the coverage they need.
Car insurance is not only required by law, but it can also be one of the most beneficial plans to have. How do you know how much to get or which kind of policy you need?
You need to do some homework first. To get you started, we are going to detail auto insurance and all of its different parts.
Why is car insurance so expensive?
Let’s get started with the most common question, “Why is car insurance so expensive?”
First of all, you can probably save money on your car insurance.
Secondly, car insurance rates have been going up every year. The national average for car insurance premiums is slowly creeping up.
Back in 2012, the average policyholder was paying $815 a year for their insurance coverage. Since then, it’s only gotten more expensive.
If you’re paying more than this, we can help you save cash on your car coverage. There are plenty of factors the carrier reviews when deciding how much you’re going to pay.
What does auto insurance cover?
Let’s start with the basics of auto insurance. If you don’t know what your policy covers, then you will have no idea if you have enough or too much.
Also, the amount of protection is going to play a huge part in how much you pay for your policy.
Some policies might offer you some additional protection, but we are going to show you the standard coverage.
Liability is one of the most important parts of the plan, this pays for any repairs or injuries which other people suffer because of you. If you’re in a wreck, and it’s your fault, liability will pay for the medical bills and repair costs of the other driver.
Liability will pay for any repair costs for the OTHER person’s car damages. Collision pays for your car.
A lot of people use collision and comprehensive insurance interchangeably, but they are slightly different.
Collision insurance will pay for will pay for any damages to your car because you ran into something, either an object or a vehicle.
Comprehensive insurance pays for everything else (which is why it’s called comprehensive). If your car is damaged because of something falling, from a store, vandalism, or if someone steals it, this is where your comprehensive insurance will come in.
Personal Injury Protection
Personal injury protection (PIP) is similar to liability coverage, except PIP pays for YOUR hospital bills. PIP can pay for any medical expenses you incur because of a wreck, but it can also pay for lost wages if you’re out of work.
Michigan is the only state which requires drivers to have property protection insurance, but everyone should consider having additional coverage tacked on to your plan.
Property protection will kick in if you were to knock over a mailbox or take out someone’s fence. With most plans, you get up to $1 million in property insurance protection.
Underinsured/Uninsured Motorist Coverage
Every state requires at least SOME car insurance. It’s illegal not to have car insurance. The problem is, not everyone obeys those laws.
What happens if you are involved in a wreck with someone who doesn’t have insurance or doesn’t have enough insurance to cover the damages? If this happens, this is where underinsurance/uninsured coverage comes in.
How do insurance companies determine auto insurance premiums?
When you apply for an auto insurance policy, the company doesn’t just give you a random number of premiums. They use a lot of different key factors and algorithms to figure out how much to charge you.
Some of these factors you can’t control, but there are others you can:
Age – for drivers under 25, your rates are higher. Younger drivers tend to have more accidents, which means younger drivers are a bigger risk.
State – where you live will be one of the biggest factors. Some cities are simply more expensive than others. If you live in a city where there are a lot of accidents, your premiums are going to be more.
Driving Record – If you have a long history of car accidents or speeding tickets, the insurance company is going to be wary of giving you a plan. If they accept your application, they are going to increase the premium size.
Claims History – The more often you make claims, the more the insurance carrier will charge you. If you cost them money, they are going to cost you money. It’s as simple as that.
Vehicle make/model – Obviously, the type of vehicle you drive is going to change how much you pay. Let’s say you drive a fancy sports car, you’re going to pay more. If you were to wreck or it was stolen, it’s going to cost more to replace.
Vehicle Usage – If you only drive your car to the grocery store on Sundays, then there are few chances for you to be in an accident. At the other end of the spectrum, if you’re putting 30,000 miles on your vehicle every year, you’re a higher risk policyholder.
Garage – Keeping your car ins a garage could save you money. A garage is going to protect it from the elements and provide an added layer of security.
Insurance Score – You probably aren’t familiar with your insurance score, but it plays a part in how much you pay for your coverage. To put it simply, your insurance score is a detailed score based on several factors (similar to your credit score).
Amount of deductible – The deductible is the amount you have to pay before your insurance company pays their part. Just about every carrier allows you to pick what your deductible is. The higher your deductible is, the lower your monthly premiums.
The Insurance Company Ratings and Risk Calculations – Aside from all these factors, the specific company themselves will impact the rates. Each carrier puts more emphasis on different factors. Some risk calculators are more concerned with usage, while others focus on claims history.
How Does Filing An Insurance Claim Work?
We hope you’re never involved in a wreck, but you never know what’s going to happen when you hit the road.
If you’re ever in an accident (regardless of who’s fault it is, you might panic. If this is your first time in an accident, you might be wondering what you should do next.
The first thing you should do is call the insurance company to make the claim (after you’ve called the police).
The insurance company is going to ask you questions about the accident, like who was driving, which car was involved, where was the accident, and the insurance information of the other person.
You’ll have to file a police report, they are going to determine who’s at fault and give you all the information you need.
After you’ve contacted the insurance company, they are going to give you an adjuster. The claims adjuster will gather more information from you. This is going to be much more detailed than the initial call with the insurance company.
If you have any pictures (which you should always take pictures), you can send them to the adjuster. If there were any witnesses to the accident, the adjuster will want the contact information.
The adjuster will also want to inspect the damage to the vehicle and take pictures. The other options is they will ask you to take the vehicle (or have it towed) to a repair shop.
After this, you’re going to wait. The company is going to review all of the relevant information and decide if they are going to pay the claim.
How Long Do Insurance Claims Stay On Your History?
If you have to make a claim on your auto insurance, it’s going to change how much you pay. Luckily, those accidents don’t stay on your record forever.
The claims will come off your record after 3 years (in most cases). After 3 years, the records are wiped from your history and it won’t impact your rates anymore.
How Much Does Filing a Claim Affect My Insurance Premium?
The number of claims you’ve filed are going to change your coverage.
Let’s say you tried to switch insurance companies. After you apply, they are going to look at your records and your driving history. The more speeding tickets, accidents, and claims, the more risk you are to the carrier.
If you make a claim, it’s probably going to raise your rates every month (depending on the insurance company). Some companies have “accident forgiveness” and they will forgive the first one.
Other carriers are immediately going to charge you more every month after the first claim. If it’s only a small amount of damage, you may consider paying for the repairs out of pocket. It can save you money in the long run.
Where to Get Cheap Car Insurance Quotes?
As we mentioned, one of the most common questions we get is why is car insurance so expensive. The next most common question is, “how can I get cheaper car insurance coverage?”
Who doesn’t want to save money on their insurance protection? If you’re looking for some quick and simple ways to cut your premiums, you’re in luck.
If you want a way to save money on your insurance this month, you need to raise your deductible. If your deductible is $500, call your insurance agent and ask them to raise it up to $1,000 or more.
You’ll have to pay more if you’re in an accident, but you’ll save money every month. As long as you’re a safe driver, and you don’t have an accident, you can save several hundred dollars every month in premiums.
Another simple way you can save some dough is to shop around. We told you every carrier has different algorithms for pricing. Just by switching companies, you could save yourself hundreds of dollars.
If you’ve ever shopped around for a plan, you know there are countless choices. Thousands of carriers, dozens of plan types, and even more add-ons.
By shopping around, you can find a cheaper plan with the same or even better coverage. We even have a list of our Top Auto Insurance Companies that you can check out.
Summing It Up
Obviously, you need to make sure you’ve met your state’s requirements for auto insurance, but you might need to go above and beyond those limits.
At InsuranceScored, we can help you find auto coverage to protect you and your vehicle. We can explain all of the different sections of insurance and help you get a policy you can afford.