What You Need to Know About Auto Insurance

Auto Insurance

Auto Insurance is one of the most important responsibilities a person must act, in order to protect themselves from various risk factors, compliance with laws, regulations, and poor drivers. Having an auto carrier that you can trust, will ensure peace of mind for you and your family. Driving is so important and with more people on the road than ever before, having the right coverage is important. Here is a quick snapshot and an inside look on what you need to know about auto insurance.

Things You Must-Know:

Insurance pricing through Underwriting and Rating: Similar to every other types of insurance, auto insurance policies also go through the process of Underwriting and Rating at the insurer’s office.
Underwriting determines the insurability of the car depending on the driver profile such as his age, sex, past driving records, claims history etc. and the car’s profile like the make & model, age, condition etc. Once the insurer is sure about the insurability and the insured is identified with a certain risk patter = according to their internal strategy and guidelines, there comes the Rating part.
Here the insurer places the insured in groups of other policies having similar risk patterns and determines the exact rate of premium required to carry out the risk. Point to note is that almost every insurer uses a different factor or formula or clause beyond the required minimum standard by laws and regulations while calculating the premiums. So, the rate may really vary quite a bit, from insurer to insurer.

Rate Factors

The driving record: records of previous traffic violations and/or accidents are regarded as higher risk.
Driver’s gender and age: Statistically, men show higher accident tendencies than women. Also, drivers belonging to certain age groups tend to have more claims than others.
Driver’s marital status: married people typically show lower rates of claims.
Geographic territory: generally, urban areas tend to have more claims filed than in rural areas.
Prior insurance coverage: Records of rejection(s) by other insurers for previous coverage are considered as almost sure shots for greater risks associated with the driver or the car and hence an obvious higher rate may get triggered. Failing to provide accurate or honest information, a criminal record involving the vehicle etc. are potential reasons of such rejection.
Usage of the car: A higher annual mileage translates to a higher cost of maintenance in general and may result in higher category of risk.
Make & model of the car: Cars under the banner of luxury and sports cars are always considered as bigger liabilities from insurance perspective as they mostly advocate a higher number of claims on costly repairs and accidents.

Important Coverages Information:

There are a few optional coverages available that may come out very handy in times of need, but will obviously increase the base premium rate. Such as:
Collision coverage – to protect the car from the damages incurred in an accident
Comprehensive coverage – to protect the car from damages caused by other misfortunes but an accident
Uninsured or underinsured Motorists’ coverage – to provide for when the other party involved in collision does not have adequate insurance coverage to take care of the damages
Rental Reimbursement coverage
Medical Payments coverage etc.

Additional Information

Tort system OR No-fault system: Every state operates on either a tort system or using a no-fault system. The system implemented by a state where the car got damaged, would determine the kind of insurance required and available there.
There are three basic coverages required to be sold under the tort system – physical injury liability insurance, uninsured or underinsured motorists’ coverage and property damage liability insurance. Whereas, in a no-fault state, the applicable coverages will vary. Point to note is that, under a no-fault system the victim driver’s insurance company has to pay the person directly for the losses incurred as injuries sustained in accidents, without any consideration for who was at fault.
Research before Buying: In order to rip the maximum benefit from the competitiveness of the market for auto insurance, one must look around, gather quotes and collect references and/or recommendations from trusted friends and neighbors on multiple insurers in that locality. Then only the policy owner would have a comprehensive knowledge of the available options and make an informed decision. At the same time, after selecting a certain plan, one should carefully read the entire policy document to make sure that all the terms, clauses and conditions are clearly mentioned in the document, as discussed and agreed before with the agent/insurer.
Carry the Proof of Insurance – at all times on road: Most states to require auto insurance also require that a proof of the insurance policy )like an ID card issued by the insurer) is always present in the car or with the driver at all times. Penalty could be severe if the same is not presented when requested by a traffic patrol officer or the police on road.

Final Pointers:

Discounts: Insurance companies often extend promotional offers and discounts depending on the market competitiveness and the drivers’ statistics. Reach out to the insurance agents for finding out more about such possibilities before signing up for the policy and/or during its renewals. Also, keep an eye open for employer sponsored plans, if applicable, to get the extra benefits (corporate discounts, loyalty benefits etc.) too.
Higher Deductibles: Having higher deductible amount of the policy would lower the premium rates. But one must decide this amount very judiciously, in order to avoid forking out a huge sum of money is and when a claim is filed.
Impact of policy lapses: Getting a new policy after the previous one got lapsed or reinstating it may impact the rates unfavorably to the policy owner.
Insurance bundles – Auto and Home: Applying for a combination of insurances (like home insurance and auto insurance) from the same insurer may give the policy owner some brownie points and level the premium rates a little southwards.
Review with time: It is a good practice to review the policy coverages with time. As the car gets older, the requirements and the market changes. Also, there may be new rules/regulations issued to alter current coverage. So, keeping up with the current situation may directly result into some happy savings.