What does proper auto insurance cover?

Auto insurance provides a valuable service, protecting you against unexpected bills if you’re in an accident. But shopping amongst all the options and rates that auto insurance companies offer online can seem overwhelming at first.

Knowing what types of coverage you need and learning how you can shave some dollars off your premium will ease your search for auto insurance.

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What are the different types of auto insurance?

There are five basic types of auto insurance coverage that you should consider buying:

• Liability Coverage – covers injury to other people and other vehicles for which the driver of your car is legally responsible. Liability insurance will kick in for you, a relative, or anyone else who was driving your car with your permission.
• Collision Coverage – helps pay for damage to your automobile caused by a wreck. The vehicle must be listed in your policy.
• Comprehensive Coverage – auto insurance covers all other damage to your automobile. For example, this type of insurance covers damage done by weather, theft, falling objects, and even riots (learn more here: does car insurance cover riots).
• Medical Payment Coverage – pays for medical and funeral costs if you, a relative or anyone riding in your automobile is injured or killed in an accident. The insurance company must agree that the prices are fit for industry value.
• Uninsured/Underinsured Motorist Coverage — protects you in case you’re involved in an accident with a driver who doesn’t have insurance or doesn’t have enough insurance to cover the expenses.

Lenders and states require drivers to carry minimum amounts of certain types of insurance coverage. For example, the state of North Carolina requires that all drivers carry a minimum of $30,000 in bodily injury, $60,000 in total bodily injury and $25,000 in property damage coverage.

Not all states and lenders have the same requirements, so check with your lender or your state’s department of insurance to make sure you’ve got all the insurance you need.

If you’re shopping for insurance online, the insurers should be able to tell you what coverages the law says you must buy.

What determines the cost of your insurance?

When you ask for free auto insurance quotes or apply for coverage, insurance companies will ask for a good deal of information. They’ll use this information to determine how much of a risk they would take by giving you auto insurance.

Your insurance premium will be higher or lower depending on how high or low your risk level is. Some of the factors that help determine your risk level are under your control, while others are not.

Factors considered by insurers include:

• Driving Record – your previous record usually has the largest impact on your insurance premium. Insurers typically will charge you more if you’ve been charged in a wreck or convicted of speeding and other driving offenses within the past three years.
• Your Neighborhood – where you live can also affect how much you pay for insurance. Drivers in cities usually pay more than those in rural areas. Insurers consider an area’s vehicle density, the likelihood of accidents and claims, and costs of repair rates.
• Your Automobile – the type of car you drive can also lower or raise your premium depending on its style, repair and replacement costs, and how often its model is stolen. A sedan, for example, usually costs less to insure than a sports utility vehicle or sports car.
• Usage of Automobile – the more you drive, the more likely you are to pay for insurance. Insurers usually charge more for vehicles used daily than those used occasionally.

Insurance Discounts

Always ask about discounts when you’re shopping for auto insurance online. The different discounts that insurers offer can be a good comparison point to help you decide which policy is right for you.

The discounts offered by different insurers vary, but some of the most popular include:

• Safe Driving – awarded for a good driving record with few or no violations.
• Claims Free – given to drivers who haven’t filed any auto insurance claims in a certain amount of time.
• Multiple Policies – for drivers who buy policies for multiple vehicles or purchase another type of insurance, such as homeowners or renters, from the company.
• Homeowners – given to customers who own their own homes.
• Students– awarded to responsible students with good grades.
• Paid in Full – granted when a premium is paid up-front, instead of in monthly installments
• Vehicle Safety Devices – given for safety devices such as air bags, daytime running lights and anti-lock brakes.