Understanding Auto Insurance: An Online Guide

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In most states, auto insurance is a requirement if you are going to own and drive a car. Unlike life and health insurance, auto insurance is fairly easy to understand as the terms are roughly standardized among car insurance companies. A little research comes into play because the requirements regarding types of coverage and limits vary from one state to another. While everyone likes cheap auto insurance rates, the cost of insuring any vehicle is determined by three things; your driving record, the make and model of your car; and the types and amounts of coverage you want. Before handing over your payment, however, be aware that “cheap” doesn't always mean “best.” You should look for insurance from a company that offers you an affordable rate and that has a reputation for prompt payment of claims.

Types of Coverage
Liability Insurance is the very least you can have on a vehicle in order to legally put your car on the road. It pays for the other driver’s bodily injuries and for damage to his vehicle if you are the one who caused the accident and is required in all states except New Hampshire and Florida. All states have minimum limits, such as $10,000 in property damage and a $50,000 for injuries. The limits are different from one state to another, but experts advise you to take more than the requirement. While lower limits may mean more affordable premiums, if your limit is not high enough to pay for the damage, you risk being sued for the remainder. Wipe out someone’s Porsche because you didn't see the stop-sign, and you have suddenly written a far more expensive future for yourself.

Uninsured motorist coverage sounds like a contradiction since liability insurance is required. The uninsured motorist coverage actually pays for your loss if another driver has no insurance. This can happen if a person is driving illegally or if the other driver is a foreigner or immigrant who is driving an uninsured car. You can also purchase underinsured motorist coverage in the event that the other driver simply has limits too low to cover damage to your vehicle.

Collision coverage pays for damage to your vehicle regardless of who was at fault. Collision is not required by the states, but if you have to take a loan to pay for the car, the bank will require collision before giving you the money. Collision coverage is the coverage that increases your premium the most, but you can keep the cost down by taking a higher deductible.

Comprehensive Coverage pays for damages caused by circumstances beyond your control, such as a flying stone that hits your windshield, a deer or other animal crossing in front of you, and damage caused by theft or vandalism. It is relatively inexpensive and is subject to a deductible. You can however, purchase “full glass” which replaces the windows in your car without a deductible.

Check with the Insurance Company Before You Buy the Car
The make and model, as well as the year affect the cost of your auto insurance. Generally, newer cars are going to cost more to insure because they are worth more and would be more costly to repair or replace. However, that is not always the case. Some cars have historically been in more accidents than others, and some are more subject to theft or are more likely to be a total loss in an accident. These issues impact the cost of the insurance. Be aware that regular insurance companies do not provide “antique” value rates. If you are driving a car that qualifies as an antique, you need to look for companies that specialize in that type of insurance.

Controlling the Premiums
Although you cannot purchase less than the minimum requirement, you can take certain steps that will lower your premium.

• Maintain a good driving record. Many companies give discounts if you are accident and ticket free for a certain time period. If you have taken driver’s education or a defensive driving class, you can also get a reduced rate.
  
  
• Take a higher deductible. You will pay less for your policy if you take a $1000 deductible. Just put that amount of money in a savings account so it will be there if you ever do have an accident.
  
  
• Student discount. Many companies now give discounts to students who maintain a B average or higher.
  
  
• Anti-theft and safety devices. You will have lower premiums if your car has an alarm system, anti-lock brakes, and air-bags
  

Check out the Company
Finally, make sure your insurance company is financially stable by checking its rating at websites like A.M. Best, Standard and Poors, Weiss Research or Duff and Phelps.

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