Car buying advice: Understanding auto insurance

This article discusses car insurance. It defines commonly-used terms and gives tips on getting the most coverage for the best price.

Auto insurance: most states require it and everyone needs it. Automobile insurance is one of the most important kinds of insurance a person can buy. Since the U.S. is such a mobile country, with an automobile-centered lifestyle, it only makes sense for a person to make certain his automobile is fully insured. There are many insurance providers, and many options available. Which is right for which driver?

Liability insurance is the basic coverage a person can buy. If a person is at fault in an accident, it covers the damage to the car, and medical expenses, if there are any. Most states require liability coverage for every car on the road. The minimum dollar amount changes from state to state, but an insurance provider has all the details. Since liability can protect a driver from paying many thousands of dollars in damages, medical bills, or legal fees, it is worth paying a slightly higher premium for better liability coverage.

Medical payments include coverage of immediate medical treatment at the scene of the accident. This is usually a basic coverage feature, as well, and is worth the premium.

The third basic coverage feature is under or uninsured motorist coverage. This policy either covers damages that the other driver’s insurance does not or covers the motorist in case the other driver has no insurance. This too, should be considered essential coverage for any driver.

Collision coverage is optional. It covers damages to the at-fault driver’s car. Collision coverage usually has a deductible, and premiums for it can be reduced by choosing coverage with a higher deductible. Collision coverage will pay for damages up to what the insurance company determines the car is worth. A related feature is gap insurance. If the car is leased or financed, the gap insurance will pay the difference between what the car is worth and what the driver owes on the car, if the vehicle is totaled. For example, a driver owes $17,000 on his car. He has an accident and the car is totaled. The insurance company determines the retail value of the car is $11,000. The gap insurance then, would pay the $6,000 difference between the check the insurance company issues for the car, and the $17,000 owed on the car.
If a driver has an older car, collision coverage may not really be necessary. If the deductible to have the car repaired is more than the car is worth, for example, then collision coverage is probably not needed.

Other coverage options include glass replacement, towing services, car rental coverage, roadside assistance, and comprehensive coverage.

Comprehensive coverage includes everything that could possibly happen to the car. It covers unknown persons damaging the car and “acts of God,” like hail damage, as well as collision coverage. Buying this is up to the driver. Compare prices carefully, here. Towing insurance and roadside assistance are probably not worth the money, especially if the driver has other options, such as assistance through his car’s manufacturer, auto club assistance, or through his cellular phone, which has become very popular of late. Car rental coverage is probably worth the premium, especially if the driver is very dependent on his vehicle. It covers the cost of a rental car while the damaged car is being repaired, or while the person is looking for another car.

A driver should compare several quotes with different providers before committing to car insurance. Most providers offer lower premiums to drivers with no points on their driving records in the past three years or so, and to those who drive fewer miles. Drivers can also lower their premiums by installing anti-theft devices, and making sure their car’s safety features are up-to-date.

Drivers with teens in the family will almost certainly pay more for insurance–in some cases a lot more. However, students who make good grades sometimes qualify for a discount on premiums, and fair or not, teen girls usually get lower premiums than teen boys. Insurance companies rely on statistics, and the numbers say that teen boys are much more likely to be involved in a serious accident. Fault, however, does not usually favor one gender over another. If a teen girl is involved in an accident, she is as likely to be at fault as a teen boy.

Shopping around is the best way to find the best premiums. The Internet has many sites which will allow a driver to compare rates among companies. Many will also walk a driver through insurance issues that are outside the scope of this article. Compare rates and accrue any information about the car or driving habits that will lower premiums are the best ways to get the most coverage for the best premiums.