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So you’ve finally got that dream car – something perfect for you (or, rather, perfect for what you can afford!) Hopefully you’ve budgeted for the other side of owning a vehicle: auto insurance. Not sure what you need? Read on!
What is auto insurance and why do I need it?
When you obtain an auto insurance policy, you pay a premium in exchange
for a specified amount of coverage in the event something happens to
your car (such as an accident or theft). Insurance, more specifically,
pays for the transfer of risk.
How much insurance do I need?
Auto insurance is regulated by state governments, and each state has
its own insurance commission, which handles complaints and regulates
rates. This means that where you live determines the minimum requirements
for auto insurance. States often require a minimum amount of insurance
coverage for certain categories of auto insurance, such as some amount
of liability insurance. Some states also require uninsured and underinsured
motorist insurance, or even medical payments insurance.
What can I expect to pay?
Premiums are based on a combination of factors, including the amount
and kind of coverage, your driving record, the theft and safety statistics
of your make and model of car, how much you drive, how large of a deductible
you would be required to pay in the event of a claim, and the record
of other drivers (such as a spouse) listed on your policy.
How do I pay?
Typically an auto insurance policy will require payment every six months
or year, so that the can have the premiums reflect heir most recent
claims expenses (and generally, the more they have paid out to their
customers, the higher you can expect your premiums to be). You may
be able to pay on a monthly basis but if you do this, expect to pay
interest on top of the payment for this arrangement.
Tips to help lower premiums
Auto insurers will gladly cut you a break on your premiums if you share
in the risk. One way you can do this is by limiting the maximum amount
of potential liability the insurer will face on your behalf. Limiting
the amount of coverage you get, based on your particular circumstances,
can help, as can eliminating any unnecessary coverage.
You can also increase your deductible to lower your premium. For example, if you agree to pay a $500 deductible when filing a claim instead of $250, your premium will be smaller but you will of course pay more up front if you file a claim.
Consider, too, that the less likely you are to be in an accident, the
less risky you are to an insurer. Reduce your opportunity for an accident
by driving less, or by buying a vehicle with a good reputation for safety.
Finally, the common sense tip: shop around. Compare rates at different
insurers but remember that cheapest insurer may not always be the best:
it’s important that you’ll be treated fairly in the event
that you need to make a claim.