7 Must-Know Facts About Car Insurance that Can Benefit You.
Car insurance has been made compulsory by law around the globe. So if you are planning to buy a car, you should also learn some crucial facts about car insurance.
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7 Must-Know Facts About Car Insurance that Can Benefit You.
Life is unpredictable. No one really knows what is going to happen the next day. Amidst all these uncertainties, the best thing we can do is to prepare for the challenges that life can throw at us. Talking about securing the future, there’s no better option than getting insurance. And we are not just talking about life insurance but also the other significant options: health insurance, vehicle insurance, and travel insurance that can safeguard our interest.
Ironically, the law mandates every car owner across the globe to get his or her vehicles insured, but there’s no such compulsion for the insurance of life or health. So even you have successfully dodged the issue of insurance all your life (which is not an achievement, by the way), you can no longer do that if you are planning to buy a car.
Interestingly, most people look for the latest model of cars, how much engine power the cars deliver, their price, their performance, and lots of other features that matter. However, there are only a few people who actually pay heed to car insurance options. Due to this ignorance, a lot of people end up paying more for insurance or even choose the option that does not meet their needs.
7 Must-Know Facts About Car Insurance that Can Benefit You
If you are not quite familiar with the various car insurance policies, this may be the right time to learn a few things about car insurance that can actually benefit you.
The prices for car insurances vary from one company to another
One of the major rookie mistakes that most people make during their first car purchase is availing any random car insurance that is presented to them in the first place. Since you don’t have any idea about the insurance plans, it is easier for the insurance companies to convince you into buying their insurance policy. What you might not realize you could actually save a lot of bucks if you just had compared the popular car insurance plans before purchasing one.
Like any other service, car insurances are also available at various prices. In fact, you will be surprised to know that the price differences between some insurance plans. However, there are valid reasons for the difference in pricing. Since every insurance company assesses risks with their own unique formula to decide what you should pay for the coverage, you are likely to find multiple insurance options with the same policy, but at different rates.
Needless to say, it’s always better to compare the available insurance plans before choosing one for your car. A lot of experts suggest that car owners should always look for insurance plans that offer a good price as well as brilliant service. There are a significant number of insurance companies that offer sufficient coverage at low prices.
Most helpful coverages are often cheap ones
The liability insurance, which delivers the coverage you are required by the law to avail, is generally the most expensive option available in the market. And there’s enough reason for that. The majority of the common coverage limits mean that the insurance company is bound to pay as much money as it requires for any damage you make.
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However, most of the coverages are usually covered by the value of the car. Interestingly, the majority of the optional coverages including roadside assistance, gap coverage, rental reimbursement, comprehensive coverage, and even the uninsured motorist coverage can offer a lot of protection for a little bit of extra price. Although in the case of a collision, where you are at fault, the coverage can cost a lot of money.
Among all the optional coverage options, comprehensive coverage is the most expensive one. However, it is still cheaper than collision coverage and liability coverage. The comprehensive coverage is actually quite beneficial as it covers your car from theft, fire, and even vandalism.
On the other hand, the uninsured motorist coverage is a great option to check out, considering the benefits it offers as well as the number of increasing uninsured drivers on the roads. You can actually check out all the coverage options available for your car and decide the benefits you need the most. Even if it costs a bit much, some of the options can save a lot of expenses in the long run.
Several factors can influence the car insurance rate
Insurance companies usually consider a number of criteria during the evaluation of an insurance application. Most of these companies have different guidelines to decide which groups of drivers they want to accept and how to charge those groups of drivers whom they believe are prone to greater risk. So the assessment of the driver can be completely different for two companies.
The process of evaluating a driver, which is termed as underwriting, generally puts insurance applicants in a group, based on the assumptions of how much money and how many claims the insurance company may have to pay. Interestingly, the underwriting process is performed by dedicated software.
While the software does the underwriting, the insurance company actually looks up the motor vehicle records to see how many accidents the driver has been involved in and how many tickets he or she has received in the past.
Some of the insurance companies also use the insurance history report to check whether the driver has made any car insurance claim in the past and how much money was actually paid. Even though they usually look for records of the last three years, some even choose to check the records of the last five years or more to decide whether they want to offer the person insurance or not.
Some insurance companies even look at credit history. Usually, if you have a bad or no credit history at all, you need to pay more for insurance. So if you can improve your credit score, you can actually save some money on insurance.
Higher deductibles can lower the premium
The insurance companies usually determine the price of particular insurance by estimating how much money it may have to pay. However, if you agree to pay for the major portion of your own damages by raising the deductibles, then the insurance company no longer needs to pay a huge amount for your claims.
This strategy of raising your deductibles can actually make the insurance company lower the amount of premium. However, it is only going to be beneficial, if you can afford to pay the deductible when you make a claim.
Your choice of coverage determines what you pay
As mentioned earlier, the liability insurance costs the most, and since it is made compulsory by law, you do not have the option to dodge it. Also, it is not a good idea to reduce your expenses on this portion of the coverage because then you will be held responsible for the damages that go above your policy limits.
You can, however, try to reduce or eliminate the other coverage to lower the premium. Even though some of that coverage is quite helpful, it may seem okay to let go of a few of them under certain circumstances. For instance, if you have an older car that is not worth much, or you can afford to pay for a new car, it may be wiser of you if you choose not to avail collision and comprehensive coverage.
The car insurance may vary depending on the car you drive
A great number of insurance companies set the prices for insurance based on the insurance accident statistics for most types of cars. Say, for example, if you own a car which is expensive to repair, the insurance company will have to pay more in case you met an accident. So it seems logical for the company to charge extra money while providing you with a coverage plan.
On the other hand, if the vehicle seems extremely safe to drive around and also protects the occupants well, the insurance company has a lesser chance of paying for the damages due to an accident. So the insurance company can offer you coverage at lower prices. Also, if you have a car that is less likely to be stolen, the insurance company does not have to worry about paying you for a replacement in case of theft.
You will have to pay more in the long run, if you let your policy lapse
The majority of the insurance companies see a licensed driver, who does not have insurance, as a risky and irresponsible individual. Based on this detail, if you let your policy lapse, you will have to pay more when you go to buy car insurance.
A lot of people intentionally let their policy expire because they want to switch companies. Some people, on the other hand, cannot pay for their policies due to financial constraints. If you are actually, willing to switch to a different company, make sure to purchase insurance from the new company, before the current policy lapses.
There are lots of other little details about car insurance that may come in handy for you. However, it may be wiser if you take the advice of a consultant before availing car insurance. Yes, these aforementioned details can be quite helpful, but having the guidance of an expert can offer better results in the time of need.
7 Must Know Facts About Car Insurance that Can Benefit You