HOW DOES CAR INSURANCE WORK?

HOW DOES CAR INSURANCE WORK?

If you are in an accident,  car insurance protects against the damages to your car, damages to other vehicles if the accident is your fault and also your bodily injuries.You will need to pay deductible as part of the coverage.

Car Insurance is an agreement between policyholder and insurer where the  insurer agrees  to cover a certain amount of loss in return of annual premium or monthly payments.

A car insurance policy includes different types of coverage. Following are the types of coverage under a car insurance policy:

  1. Liability coverage.
  2. Personal injury protection.
  3. Uninsured and under-insured motorist coverage.
  4. Comprehensive coverage.
  5. Collision coverage.

You have the option to choose the deductible amount and coverage limits for your coverage. Before buying coverage, there is a need to select the types of coverage you are looking for and the coverage limit you want.

Car insurance rates are decided on the basis of the coverage amount you want to purchase, your age, driving record, credit score, brand, age of the car, model of your car etc.

You can file a claim if your car had an  accident, it is damaged or stolen,  to cover the losses. 

The insurance company will pay the amount of claim directly to you or to the other party if you are responsible for an accident to cover the expenses of car repair and medical expenses of  the other party’s injury  if any..

Car insurance will make payments to creditors or leaseholders if your car is on lease.

TYPES OF CAR INSURANCE

Car insurance policy includes different types of coverage that protect financially to the policyholder in different situations. Following are the coverage:

Liability coverage

It is mandatory from the drivers in most of the states in the USA. Liability coverage helps to cover the payments of property damage or injuries of others if you are responsible for an accident.

Personal injury protection

PIP helps to cover the expenses of rehabilitation and the hospital of you and your passengers injured in the accident. PIP also covers the lost wages, rehabilitation, and coverage limits, no matter who is driving because it is a type of no-fault coverage.

Collision coverage

Collision coverage helps to cover the damage of your vehicle regardless of who caused an accident. Comprehensive and collision coverage provides “full coverage” car insurance however it is not mandatory by law.

Comprehensive coverage

Comprehensive coverage helps to cover the loss due to extreme weather, falling objects, flood, fire, vandalism, and theft even if the car is not being driven.  You can reduce your insurance coverage to just only comprehensive coverage if you are going to put your car into storage for a long time. So you need to switch it back before driving again.

Uninsured/ underinsured motorist insurance

It helps to cover the payments of damages caused by an accident whether the driver does not have any insurance policy or underinsured (which means the insurance company cannot pay full coverage of damage).

MyMoneyMyQuotes.com allows our customers to compare auto insurance quotes for free while finding best and cheap car insurance quotes for the coverage they need.

Gap Insurance

Comprehensive and collision coverage helps to cover the actual cash value of the car if your car gets  stolen. But it may not cover the amount that you have to pay to the loan agent if your car has a  loan or to the lesser if the car is on lease.

Roadside Assistance

Roadside assistance is not mandatory by law, it is your choice to buy roadside assistance or not. It is cheap coverage and helps to cover the types of emergencies that can leave you stranded on the roadside such as jump starts, fuel delivery, towing to the mechanics, flat tire changes.

How much car insurance do I need?

In most states, it is mandatory to buy at least a minimum amount of auto insurance. Any person can purchase car insurance to cover the cost of damages caused by an accident even in your state car insurance is not mandatory to buy.

MyMoneyMyQuotes team guides you to decide how much car insurance is required in the state where you live and in a few minutes you can compare auto insurance quotes for free..

Suppose your state requires that you have to purchase insurance of $20000 worth of liability coverage. But if payments of damages exceed from these limits then you would have to pay for the damages from your own pocket. So MyMoneyMyQuotes recommends you buy the insurance more than minimum insurance because minimum insurance is not sufficient to cover the full cost of damages.

Comprehensive and collision coverage provides full coverage against damages. There is a need to set Comprehensive and collision coverage as a deductible. Deductible means the amount that you pay from your pocket or amount that exceeds the minimum limit.

If deductibles are higher than you have to pay less amount from your pocket. Normally, deductibles are between $500 to $1000. But it is not wise to set higher deductibles because you have to pay it in the future.

Before selecting the deductibles and limits for insurance you need to evaluate how much amount you can pay from your own money if you cause an accident for the payment of damages, or in case if your car might be stolen by anyone.

Your assets could be seized if you are unable to pay the cost of damages caused by an accident if you are responsible for that incident. So, it is good to select the insurance policy with high limits that helps you to fully cover the cost of property damage and injuries to others.

How much does car insurance cost?

Car insurance rates are decided on the basis of different factors like age, credit score, brand, model of car and zip code. Costs of insurance are not the same for every person.

According to one of the best insurers in the USA, an annual cost of $1142 for a year for full coverage insurance. Average cost of car insurance for different types of cars are given:

TYPES OF CARS            ANNUAL COST OF CAR INSURANCE
Small SUV $1082
Medium SUV $1109
Minivan $1124
Hybrid $1990
Large Sedan $1200
Electric  $1205
Medium Sedan $1242
Pickup $1250
Small Sedan $1323

 These rates are the average rates but your car insurance rates vary according to different factors. MyMoneyMyQuotes.com allows you to compare car insurance and find cheap and best car insurance rates for your needs.

How premiums are calculated?

To calculate the levels of risk car insurers firstly evaluate personal details of the person who wants to buy car insurance. This is to predict how likely you are to file a car insurance claim.

Some factors can increase the risk like a poor driving record which means higher premiums. These are some factors considered while calculating car insurance premiums.

Age: Age effects on the car insurance premiums in a greater way like young drivers are less experienced so they are riskier for the insurers.

Gender: Gender difference also affects the car insurance premiums but in some states, the law prohibits the insurance companies from considering gender while deciding premiums.

Location: Insurance companies consider zip codes of states while calculating the premiums. People who drive in cities are riskier because chances of accidents are more in cities.

Credit history: Drivers who have poor credit history are riskier which leads to a high amount of premiums. But there are various companies in the market that provide cheap insurance to the drivers with a blemished credit record.

Driving record: Drivers with accidents or crashes in their records are riskier which means higher premiums. Mostly, insurance companies see the driving record of the past 4-5 years of the driver before deciding the rate of premium for auto insurance.

Deductible and coverage amounts: If you select the lower coverage limits and high amount of deductibles then car insurance will be cheap. But it is not good to select higher deductibles because you might have to file a claim in the future then it will be expensive for you to select a high amount of deductibles because minimum coverage is not sufficient to pay the full amount of damages.

We understand that buying an auto insurance policy can be quite overwhelming for many and may seem very complicated too. That is why MyMoneyMyQuotes.com makes it easier for our customers to compare car insurance quotes for free and find best and cheap auto insurance quotes in your zip code.

Filing a claim

Insurance allows for filing a claim if you are in an accident. Ideally call the police to report the accident, though it is not mandatory. Police will take statements from all drivers involved in the accident.  You must take photos of the damages to your vehicle and of the other vehicles involved, so it is safe to do so, , and also the place of accident. Get full information from the other party regarding the accident. 

Insurance company covers the expenses of your car from your collision insurance coverage.. Insurance companies of both parties handle how the payments are made based after determining which driver is at fault in causing the accident. 

There are various ways to file a claim – online mode, mobile phone app, or by contacting the insurer or agent It is necessary to collect the following information from the site of the accident to file a claim:

  1. Insurance policy number of every person who is involved in the accident.
  2. Pictures of property damage, injuries, and place of accident.
  3. Licence Number of vehicles, other details like color, brand, and model of a car. 
  4. Details of the witness if any and the names of the responding officer.

A car insurance company assigns a claim adjuster to you who collect the documents related to the accident that is necessary to file a claim. The claim adjuster investigates the expenses of damages and injuries. 

After investigation, the insurer covers the expenses of damages. Insurance companies can make direct payments to the repair shops which is known as a first-party claim. When an insurer makes payments to the insured person then it is known as the second party claim. The amount that is received by you for payment towards  hospital expenses is based on your health coverage.

When not to file a claim

Car insurance rates depend on your driving record. After an accident when you apply for renewal of your policy then the insurer can increase the premium.

If your damage is less  than the amount of deductibles then you should avoid filing a claim. Incidents like scratching denting the bumper involve very little cost so it might not be worth filing a claim if no other party is at fault.

Always file a claim when two parties are at fault because you may have no idea about the cost of damages to others and that  cost may be high.

Filing a claim may lead to an increase in the premiums when you renew your policy.t.Hence the suggestion to not file a claim under certain circumstances described above.

What happens if I travel out of state?

The car insurance policy also covers the damages when you go out of the state and you have  an accident. If you have only minimum coverage insurance of the state where you live then the insurance company just considers the difference between the minimum coverage of that state where the accident happened before making payments.

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