In fact, insurance companies depend on you getting overwhelmed or confused by their lingo and they do what they can to keep you that way. Not to mention they want you to think you get something when you don’t actually.
When you’re trying to get car insurance you shouldn’t have to wade through all that information. You should be able to get everything you need in just a moment. And all it takes is a little information on some of the basics and you’ll be able to really compare and pick up the best car insurance for you.
Age is one of the most significant factors in the cost of auto insurance. As drivers gain experience, insurance rates typically drop, as older drivers are less likely to be involved in an accident or commit a driving violation.
This chart with data from The Zebra shows the average car insurance rates by age group. It highlights that 16 to 19 year olds can expect to pay more than double their 20 to 29 counterparts. It also shows that rates decrease until the 60+ age groups. This is typically because older drivers are more likely to have slower reactions that could lead to an accident and may suffer more serious injuries in a mild to serious accident that is reflected in the insurance rates.
Look at the different extras, the discounts, the coverage options and more and you’ll be able to make the right choices. Not to mention you can keep your insurer from tricking you into something you don’t want.
1. Liability Coverage Options
When it comes to damage on your vehicle liability coverage is where you’re going to get reimbursement. What you may not know is that 47 different states require you to have this kind of coverage.
The way it works is two-fold. You get bodily injury coverage that pays for medical expenses for another person if there’s an accident. You also get property damage coverage if you cause damage to another person’s personal property.
Bodily Injury Liability
This type of liability gives you coverage if you cause someone else’s injury or death. Medical expenses, lost wages and pain and suffering are covered under this section of your coverage.
What that means is, if you’re sued, your liability will also cover defenses and court costs. If you look at your policy your coverage is generally two separate numbers, which dictates how much is paid per person and how much is paid per accident as a whole. So, the first number can be paid to each person in the accident up to the total amount covered. Anything else is going to be your problem.
Property Damage Liability
The second half of this is the property damage, which means that it covers anything that belongs to someone else and was damage as part of the accident. That might be a fence, their car or their house. Usually this is going to be the third number on the list after the amount doled out per person and per accident. So look for another number on your damages list.
Keep in mind that each state is going to have different requirements when it comes to their liability insurance. Some have higher minimums than others and you’ll need to pay attention to those. If you don’t have the minimum you can be fined. But it’s often going to be a better idea to have more than the minimum to protect yourself.
2. Physical Damage Coverage
Also commonly referred to as full coverage, physical damage coverage includes both comprehensive coverage and collision coverage. We’ll talk about it in a minute, but collision is when you collide with an object or with another vehicle. Comprehensive pays for things that you have nothing to do with, like floods and fires or theft and vandalism.
3. Collision Coverage
Collision by itself takes care of the damages to your vehicle, whether you’re at fault or someone else is.
For those who have a car that’s new or that’s important to them for another reason, this is a good idea. For those who are financing it’s generally required, but for old vehicle with no value it’s likely not important.
4. Comprehensive Coverage
This one is when you’ll be reimbursed for things like theft or damage to your vehicle that doesn’t come from hitting something. It could be something falling on your vehicle or an earthquake or flood or fire. Even vandalism, riots and hitting animals are considered part of comprehensive coverage.
Generally you’ll have a deductible of somewhere around $100 to $500 though you can also opt to increase it if you prefer. This type of coverage is sometimes, but not always, responsible for covering glass as well. Though some will require you to pay for additional coverage for glass.
5. Gap Insurance
This is the type of coverage that you get if you’re leasing or financing a vehicle and it’s worth less than what you owe on it.
Normally, if your vehicle is totaled out, the insurance company will give you the amount that the vehicle is worth. But if you owe more than it’s worth you would be stuck paying the difference. Gap insurance takes care of paying that extra money to make sure you can walk away free and clear, which is going to be even more important if you are leasing a vehicle.
If you own the vehicle or you don’t owe more than it’s worth then you’re not going to need this type of coverage, so you can just skip the added cost.
6. Personal Injury Protection
This is considered no-fault insurance and it means that your insurance will cover medical and funeral expenses for the driver of the vehicle, their passengers and anyone else that is truck by the driver. There are limits to just how much they cover, and it doesn’t refer to property damage, but it is going to take care of a number of other aspects of your coverage.
7. Medical Payments Coverage
This is generally an optional piece of coverage and it pays for medical expenses of the person who owns the policy as well as their passengers.
It doesn’t matter who was actually at fault. It just takes care of the people who are covered. This includes if you are in a vehicle that is struck by another vehicle as well, even if you’re not in your own vehicle.
8. Uninsured/Underinsured Motorist Coverage
Ever wondered what would happen if someone who didn’t have insurance caused an accident that injured you or someone else in your vehicle? That’s where this type of insurance comes from.
You and anyone who lives with you, as well as anyone in your vehicle at the time of the accident are covered and this type of insurance means that the other driver doesn’t have insurance or doesn’t have enough insurance. You get to choose the limits on this one, and get paid out for the help you need.
The Statement of Responsibility is a document that says you have the right amount of car insurance. If you have repeated traffic-offenses or you have serious ones you may be required to get this form in order to get your driving privileges back or to keep them. This could be if you are found to be driving without insurance and cause an accident or if you have had your license suspended or have gotten a DWI.
You’ll find out from the DMV if you need this form and just how to fill it out and get it. Then, you’ll need to work with your insurance provider to do it and they’ll actually file the paperwork for you. You’ll likely be considered high risk and your insurance will be affected by having to fill out this form, but make sure you find out from your local DMV what you need to do .
This is the amount of money that you have to pay before your insurance is going to pay anything at all. You usually get to set the amount that you want your deductible to be and the higher it is the less you pay monthly.
This is what you’re going to pay to the insurance company every month.
You can choose to make the payments more frequently or less frequently, so you can pay monthly or quarterly or every six months. If you decide to make larger payments rather than splitting the payments over every month you generally get a bigger discount.
Your home state can have a significant impact on your car insurance rates. This can be attributed to high density populations, higher numbers of uninsured drivers, the costs of lawsuits and even unique insurance schemes.
In this chart created with data from The Zebra shows the ten most expensive states for car insurance. It shows Michigan continues to have the highest average annual premiums. The average cost of insurance is significantly more in Michigan compared to the second most expensive state, Louisiana.
If you don’t have insurance for a period of time that means you have allowed your insurance to lapse. You are not covered. And when you decide to get insurance again you could end up with a higher premium on your new policy because they don’t know enough about your driving history.
Keeping continuous coverage is going to be the best way for you to go.
13. Rental Reimbursement
If you have an accident that totals your vehicle or requires extensive repairs for your vehicle you may want to get a rental car, but they can be expensive.
If you have this type of coverage you’ll be able to get a rental vehicle paid for by the other insurance company if they were at fault. That’s definitely going to make it easier for you to get around the way you need to.
14. Declaration Page
A car insurance declarations page is the first page of your auto policy, and it reveals all of the policy's fundamental features, such as how much your car insurance premiums are and what types of coverage are included. The declarations page serves as a synopsis of your motor insurance policy.
The declarations page, often known as the dec page, offers information on your premium, the frequency with which you pay it, and the deductibles for each coverage component that you must pay. It will list your vehicle, make, model, and lienholder if you lease.
15. Additional Insured
An additional insured owns a portion of a car or is responsible for a vehicle that is insured by someone else.
There is a distinct difference between an additional insured and a listed driver. Do not think that just because you are named as a driver on someone's insurance policy, you will be compensated for a loss. On insurance claim checks for entire losses, only identified insureds, loss payees, and additional insureds are listed.
The additional insured must possess one or more of the cars covered by the insurance. Furthermore, depending on whether or not this person is identified as a driver or has insurance elsewhere, this person may or may not be able to drive the vehicle.
The stated driver may or may not own the vehicle, be the principal operator, or only use it on occasion.
16. At-Fault accident
At-fault accidents are car accidents caused by negligence or carelessness by a driver. The at-fault driver's insurance covers the injuries and property damage sustained by other drivers in most states.
This is up to the policy limits. It's also possible for multiple drivers to be at fault in an accident, in which case the state's negligence laws will determine each driver's financial liability.
Most drivers are aware that crashes can have an impact on insurance costs. In this chart using The Zebra data, you can see that an at fault crash increases the average cost of minimum coverage from $565 to $884. The price increase is even more significant if you have full coverage. You can expect to pay as much as 50% more on average.
Underwriting is the process by which an insurance company assesses its risk. This could be for a home, a car, a driver, or a person's health or life. It assists an insurance firm in determining whether or not taking a chance on providing coverage to a person or business is lucrative.
The underwriter determines the insurance premium that will be charged in exchange for taking on this risk after assessing the risk.