Best resource for learning everything about insurance!

What is Car Insurance? And Why do we need it?

Our life today has filled all kinds of uncertainty. As we move on and try to take control of our lives, rarely do we know what lies ahead – whether it’s an opportunity or a disaster. All of us crave to know what the future holds for us. So that we can have some sense of certainty when it comes to our lives. However, this feeling of confidence is nothing more than an illusion that lulls us into a false sense of security. In earlier times our ancestors used to contend about survival in different conditions to be able to sustain life. They used to deal with and stress about situations like being attacked by wild animals or what will their next meal be and so on. Compared to those times, our position has dramatically improved now, and we no longer have to worry about the situations that they had to deal with. However as we have progressed as humans and grown in the way of living, the conditions have changed. Now we don’t worry about whether wild animals would attack us. Instead, we worry about can we have a bigger house to live in? What will happen to my family when I die? What if something happens to the car? Some of these questions can we answered while some cannot. Here is where we start talking about insurance to take care of the uncertainties of life. Like everything else, when we talk about coverage also, we want the best rates to be it the best car insurance rates or rates for any other type of insurance.

Many types of insurance are currently available in the market. To understand how insurance works, let us pick up the discussion for one particular kind of coverage. Let’s talk about car insurance.

How does Car Insurance work?

Considering the rat race that we live in currently, we are always on the move and have to worry about how we will travel regularly. Like all other demands in our life, someone of us prefers to hassle about using local transportation while some of us prefer the comfort of our own vehicles. Most of the states now require you to have the car insurance. There are different ways of purchasing car insurance. The most convenient way would be buying the same online. It’s important to remember that insurance like loans is very competitive as far the different institutions are concerned. Checking online gives you the liberty of comparing the insurance rates offered by the various insurance providers. You can check all the different insurance providers and the deals offered by them so that you can choose the best car insurance rate for your requirement. The other way you can avail car insurance is through the vendor when you are buying the car from. However, the dealer would have a tie-up with a couple of insurance providers, and they might not be able to offer you the best car insurance rate compared to the multiple options available online. Also while you are checking out the best car insurance rates, you might want to check out the coverage also that they offer. Since the coverage conditions would also change from provider to provider.

While acquiring the quote for your car insurance, there would be some questions that you would need to get answered, which are

  • Details for the type of car that you are driving and acquiring insurance for
  • An approximate value of the number of miles that you drive the car for in a year
  • Where you reside
  • If you have any driving history, any laws that might be accidentally or purposely broken?
  • Who will the driver of the car be? You or some family member?
  • Any period during which the vehicle was running, however, the care was not insured at that time?
  • If anything happened to the car like if it were stolen or damaged, you would need to contact the insurance company to claim the same.

Types of Car Insurance Claims

There are many types of plans and coverage that can be acquired for your car. At times the insurance provider might work on designing a customized package for you based on your requirement. There are a variety of reasons to claim when it comes to car insurance. For example –

  • Claim for collision with another vehicle or object or even other person’s property
  • The claim in case the car is vandalized, stolen, burglarized, or damaged by a natural calamity.

When you make a claim, you are basically asking the insurance company to provide a payment for the damages done to the vehicle, including bodily injuries encountered by the other person or any property that would be damaged due to the accident, which has occurred and is part of the coverage provided by the insurance provider. Most of the times the coverage also covers any medical expenses incurred by you or the passengers in the car or any other pedestrians or drivers or anybody that would have to go hurt due to the covered accident.

Great! Now we understood how and what to look for while acquiring the best car insurance rates and coverage. However, the main question that arises – do I really need to take out any car insurance for my car? The answer to this kind of problem would always be Yes! Possibly every state requires that you have a car insurance if you own a car. This is the legal aspect of the situation in question. Apart from the legal obligations, you would personally want to buy a car insurance to meet your requirements.

Automobile accidents can turn out to be pretty expensive. This is especially true in case you are at fault. If it happens to be your fault – the first thing that would need to be taken care of and can be the most expensive is the payment for the damages to the vehicle. Other than that you would land up paying the damages for the other person’s vehicle also, in case there was a second vehicle involved in the accident. Then come the medical expenses for all the parties involved in the accident. The money required to cover all of these expenses could be rather high and probably people might have problems availing the funds for this at a short notice. Here if there had been adequate amount insurance, which had been availed, then the cost wouldn’t be so much of a burden and you can claim insurance, which would take care of the necessary expenses.

Other than the accident since acquiring car insurance is a legal requirement, there are other fees and penalties that you become liable for –

  • Since having insurance is a legal requirement, you could be penalized for not having car insurance.
  • Additionally, there could be a suspension on your license.
  • Your vehicle could also get towed.

Understanding Car Insurance Deductibles

The deductible for car insurance is the sum of money that the owner of the policy pays from his pocket to the insurance provider in exchange for the policy.

It is definitely not similar to health insurance when the policy owner or holder pays the insurance premium up to a certain amount. Once the policy owner has made all the payment till the limit set, the insurance provider will take over all the remaining payments, in most of the cases. There might be some cases where the insurance company might not take up all the payments, however, there would ensure that most of the pending payments are taken up.

In the case of car insurance, the policy owner pays a certain amount of money or pays the deductible every time they make an insurance claim. Post the payment of the deductible, as far as the car insurance loss is concerned, has been paid, and then the car insurance company begins making the pending payments till they reach the limits of the policy. Let’s take an example to understand how this works. Assume that you accidentally damage the rear bumper while backing the car into a curb. Now what needs to be done is that the bumper needs to be replaced. In case the bumper would cost XXXX amount of money. However, there is a YYY amount of money, which in this case would be the deductible for this type of accident. Hence what the insurance company lands up paying is ZZZZ = XXXX – YYY, as a compensation towards covering the costs of the accident. However, if you want to reduce the insurance premium that would need to be paid, this is possible if the deductible amount can be increased. Thus a car owner can reduce insurance costs.

Conclusion

Without the possibility of having car insurance, there is a lot of hassle that the individual or in other words, the car owner would need to go through – a bargain on the repair costs for the car as well as work with the other drivers involved in the accident and get their costs or expenses reduced. Then work out a good bargain for a rental car. Being involved in the accident is one thing and handling all this is another situation altogether. A car insurance if taken with the right coverage can help work with you at every step, ensuring that the entire process is smoothly executed without any stress.

Best Car Insurance Rates 2019

The following factors will affect your car insurance premium rates –

  1. The Car Manufacturer and Model – If your car manufacturer has a good reputation in the market and is known for making safe cars, your premium rate will probably be low. Also, the size of your car is taken into account.
  2. Age of your car – The older your car, more will be the premium that you will have to pay.
  3. Insured Declared Value (IDV) – This is the present market value of your car. It is taken into account when your premium amount is calculated.
  4. No Claim Bonus (NCB) – This is the most important discount you will get on your policy. Higher the NCB rate, more will be the discount on your premium amount. But for this percentage to be high, your claim history with the insurance company needs to be clean. You shouldn’t make any claims on your previous car insurance plans.
  5. Add-On Covers – If you opt for buying add on covers with your auto insurance plan, the premium amount required to be paid will proportionately increase.

Apart from these factors, it is also important to know when to make a claim, if your vehicle gets a minor scratch or dent, it’ll probably be better for you to get it rectified yourself. Making a claim on your policy for such a small repair expenditure does not make sense. Also, having safety measures and anti-theft devices placed in your car makes you eligible for some additional discounts on your premium.

InsurersSingle Female, 20Single Male, 30Married, 40Married, 65Average
GEICO$1,464$605$600$576$810
State Farm$1,656$696$684$612$912
Nationwide$1,800$864$852$804$1,080
Allstate$2,064$1,080$972$984$1,275
MetLife$3,888$1,428$1,116$984$1,854
Amica$3,048$780$804$780$1,353
Erie$1,660$744$708$744$964
Safe Auto$4,068$2,268$1,860$1,848$2,511
National General$2,460$1,152$900$804$1,329

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.