Car insurance is a mandatory requirement for all drivers, in every state. Each state set forth its specific requirements, but there are minimum amounts that every driver must purchase to legally drive. Car insurance is also very complicated and expensive. Many drivers will overpay and do not properly understand what emergencies they are covered for. While it is often best to speak with your representative about specific car insurance questions, there are a few basic things you must first understand.
Liability & Property
There are two separate types of auto insurance claims: liability and property. Liability covers you if you are sued for any reason such as negligence or intent to harm another person. Property insurance covers you if you have damage to your own car, or if you inflict damage to another car.
Wealthier individuals will need more liability insurance because they are more likely to get sued. They can often afford to pay more out of pocket to fix their own cars. They may be able to elect less coverage for property. On the other hand, those persons without much money can have lower liability limits but should opt for higher property limits.
Limits & Deductibles
Limits are the maximum amount your insurance company will pay either per claim or per policy. Most contracts have limits for both. You may also have different limits for liability and property. Lower limits generate lower premiums, or payments.
A deductible is how much you will have to pay out of your own pocket before the insurance company starts to cover a claim. You will have a per occurrence deductible and a per policy deductible in most cases. Raising your deductible will generally lower your auto insurance premiums.
Lines of Coverage
Most states require you carry basic lines of coverage, but there are many optional lines of coverage available. For example, you can choose to elect coverage for yourself if you drive another car. You can also choose to add other drivers to your policy. Or, you may want to elect a special coverage for theft of your vehicle or parts of your vehicle.
One of the most common types of coverage is uninsured motorist coverage. This coverage insures you against uninsured motorists. This insurance kicks in if you have an accident with a person who does not have proper insurance.
How to Compare Car Insurance Companies
While most auto insurance contracts contain similar information, car insurance companies can be very different from one another. Working with a good company will get you better service, better coverage and even better rates. One way to compare insurance companies is through reviews.
You can check the Better Business Bureau or ask your friends and family about the companies you are considering. You can also compare companies based on the car insurance ratings. Most insurance companies are rated through systems like A.M. Best or Standard & Poor's. These ratings will tell you if the insurance company you are working with is financially sound.