Making sure you have the right auto insurance coverage is extremely important. If you own or operate a vehicle, you need auto insurance to comply with state laws, protect your assets in the event of an accident, and to satisfy your lender if you’re paying off your car.
If you’ve got questions about what kind of auto insurance you need, what it covers, or what determines your cost, keep reading. We’ve got answers to the most commonly asked auto insurance questions.
1. What Are the Different Types of Auto Coverage?
There are various types of coverage that can be included in an insurance policy:
- Liability Coverage (both bodily and property) protects you if someone is injured or another person's property is damaged in an accident.
- Collision Coverage protects against damages to your vehicle from a collision with another car, object, pothole, or from flipping over.
- Comprehensive Coverage reimburses you from non-collision damage to your car, such as damage from severe weather, fire, or hitting an animal. This can also include windshield damage.
- Underinsured and Uninsured Coverage protects you if you get into an accident with somebody who doesn't have insurance or doesn't have adequate coverage to pay for your damages.
- Medical Payments or Personal Injury Protection (PIP) covers injuries to you or your passengers. This is different than liability coverage, which covers injuries to a third-party.
2. What is State Minimum Insurance?
As the name suggests, this is the minimum amount of auto insurance coverage that you must carry in order for your vehicle to be street legal in the state where your car is registered.
In most cases, state minimum coverage includes a small amount of liability protection, though some states also require underinsured/ uninsured coverage.
3. Which Factors Can Affect My Insurance Cost?
Many factors can affect your cost of auto insurance, including your age, gender, marital status, and where you live. It may not seem fair, but people under the age of 25, males, single people, and families with young drivers tend to have more accidents -- and higher premiums.
Here are just a few of the factors that determine your premium price:
The more accidents or claims you have on your record, the higher your premium is likely to be. A clean driving history will afford you a better rate.
Those with higher credit scores are considered a lower risk by insurance companies and therefore may be able to enjoy lower prices on their coverage.
Type of car
Dangerous or flashy rides can be flagged as a higher risk for insurers. Premiums can increase for cars that are known to be more susceptible to damage, occupant injury, or theft.
Previous claims history
Your auto claims are typically reported to databases that allow insurance companies to see your claims history. The more claims you’ve filed, the bigger the risk you may appear to an insurer and the higher your premium could be.
4. What Happens if My Insurance Coverage Lapses?
If you’re facing a scenario where you’re considering cancelling your auto insurance, take note: a lapse in coverage is never a good idea. The most common reasons people let their insurance lapse are financially driven, such as forgetting to pay a bill or not having enough money to pay.
But the cost of getting into an accident without insurance could cause you even more financial strife, such as:
- hefty penalties and reinstatement fees to get your coverage back
- being ticketed or having your car impounded if you’re caught driving uninsured
- financial hardship if you have to pay out of pocket for damages an accident that you’re involved in
Plus, letting coverage lapse can result in higher premiums the next time you get covered. A lapse in coverage can end up costing you even more in the end.
5. What is an Insurance Deductible?
A deductible is the total amount you're responsible to pay out-of-pocket before your coverage kicks in. For example, if you have a $1,000 deductible and you're in an accident that causes $5,000 in damage to your car, you'll pay your $1,000 deductible and your collision coverage (if you have it) should cover the rest.
Generally speaking, the higher your deductible, the lower your premium will be—but the more you'll pay out-of-pocket if you have to make a claim.
6. How and When Should I File a Claim?
You should file a claim with your insurance company as soon as possible any time you're involved in an accident or another covered incident.
Most claims can be reported over the phone by calling your insurance agent, but depending on your carrier, you may also be able to file one online.
When you file a claim, you will be asked to provide some specific information about the incident. If you have been in an accident, your insurance company may ask for photos of the damage to your car as well as a copy of the police report.
7. How Can I Save Money on My Auto Coverage?
Most auto insurance companies offer discounts for policy holders who meet certain criteria. For example, if you haven't had an accident claim in the past five years, you may qualify for a "safe driver" discount. Talk to your insurance company about other ways to save, such as:
- Insuring multiple vehicles with the same insurance company
- Combining multiple policies (such as homeowners insurance & auto) with the same insurance company
- Taking a defensive driving course
- Paying your policy premium in-full rather than making monthly payments
One tactic commonly used to lower premium prices is to increase your policy deductible, but think carefully before making this decision.
Sure, a higher deductible can result in a lower monthly premium, but do you have enough cash reserves to cover the larger deductible amount in the event of an accident? A deductible that is out of reach is not helping protect you against the financial risks of an auto accident.
8. Will an Accident or Ticket Increase My Insurance Premium?
It depends. Unless you have some kind of "accident forgiveness" option on your policy, there's a good chance that being in an accident (regardless of whether or not you were at-fault) will increase your insurance premium.
For tickets, it depends on the type of violation. For example, parking tickets should not affect your insurance costs, but a moving violation (such as speeding or running a stop sign) might.
Auto insurance can feel a bit confusing at times, but the good news is that answers are never more than a phone call to your agent away. If you’ve got specific questions about your policy, rates, coverage, or claims process, give us a call and we’ll make sure you get the answers you need.