Owning a car comes with certain risks and uncertainties that you cannot just wish away. Accidents and theft may not occur every other day but they do occur and it helps to be covered when they do come knocking. This is why auto insurance exists but just how reliable is it? Is auto insurance really the lifesaver it is sold to be? What are the options? Below is everything you need to know about auto insurance, if not more.
Auto insurance is essentially an agreement between you and the insurance company in which you pay certain premiums and the company provides specific financial protections in case of an accident or theft. The rates of premium you pay will vary depending on the type of vehicle, type of fuel used, age of the vehicle, your age and the insured declared value. Car owners in most states particularly in the U.S. are obligated by law to obtain basic auto insurance which covers medical expenses, property and liability.
Auto insurance is typically a la carte that is, priced individually. This allows you and the company to come up with an insurance package that fits your needs and finances. Most policies are renewable and either last 6 months or 1 year.
Auto Insurance Benefits
Auto insurance provides protection for you and your family whether driving your or another person’s car with his permission. Someone not on your policy is also covered as long as he is driving your car with your permission. Basic coverage helps you cover the cost of replacing your car in case of theft. Note that basic auto insurance only pays the value of the stolen car, not a brand new one.
Are There Any Drawbacks Of Auto Insurance?
Limited coverage – In most cases only certain parts of the car are covered. Also, some types of damages may not be covered by your policy.
Delayed claims – Insurance companies may take too long to make payments.
- The insurance burden-The idea of paying premiums on a monthly basis is not even slightly glossy and most people have to strain financially to make these payments.
- Some insurance companies require that you pay for the repairs first then you can claim for the reimbursement. This is as absurd as it is inconvenient because people pay premiums to avoid the burden of shouldering the burden of such costs.
Are There Other Types Of Auto Insurance Coverage?
Basic auto insurance is not enough in most cases. You may need to supplement with other types of insurance. These are;
- Comprehensive- this covers against theft and damages from incidents other than collision e.g. hailstorms, vandalism, fire, falling objects and flood.
- Collision- it covers damage caused to your car due to a collision with another vehicle or object when you are at fault. It does not cover mechanical failure.
- Glass coverage- covers windshield damage.
Auto Insurance Myths And Misconceptions
As with most things, there is a lot of wrong information out there on auto insurance. These fake tips and hacks are thrown at us as common knowledge and often we are none the wiser. These are the myths and misconceptions of auto insurance that will make you either shy away from insuring your car or race towards a coverage policy only to be disappointed a few months down the line. Here are a few things people believe about auto insurance that couldn’t be further from the truth.
1. It costs more to insure an expensive car
Lower priced vehicles may actually cost more to insure than the expensive cars. This is because insurance companies consider the car’s loss history over its price.
2. The color of my car determines how much I pay
Rates are dependent on the car’s safety features and how much it would cost to repair or replace, not the color.
3. No-fault insurance means I am off the hook
No-fault only means that the all involved parties are paid for their immediate medical needs as the insurance companies determine who is at fault. The insurer of the party that is to blame then covers the other damages.
4. My auto insurance company can drop me whenever they please
The law does not allow insurance companies to cancel your policy at whim, especially if your payment and license are up to date. However, the company is allowed to drop you in the event of fraud or if you aren’t paying your premiums.
5. My car is too old to be stolen
Older cars are actually more popular hence there is a higher demand for their parts. This makes them a more likely target for thieves compared to newer and more expensive models.
6. A traffic ticket means higher premiums
Minor traffic violations may have no impact on your premiums especially first-time offenses. Furthermore, you can always include accident forgiveness in your insurance policy.
7. I wasn’t driving the car so I am not the one to pay
Insurance claims typically follow the car, not the driver. This means that if someone is driving your car (with your permission) and an accident occurs, it is your insurance policy that covers the damages, not theirs.
8. My personal auto insurance covers even commercial use of my car
An especially important point to make is that if you are using your car for commercial purposes, you need to insure it for business use. Only personal driving is covered. Basically, if an accident or theft occurs when you are using the car for commercial purposes you are on your own! Nonetheless, you can acquire supplemental coverage at an additional cost that would cover you if you offer ride-sharing services.
What Are Several Less Well-Known Facts About Auto Insurance?
1. Since comprehensive and comprehensive cover only pay for your car’s current value, you may take a gap insurance to cover the gap between the insurance coverage and what you paid for the car.
2. Multiply the value of your yearly comprehensive and collision coverage premiums by 10. If the number is greater than the value of your car then you probably shouldn’t be paying the premiums.
3. To pay lower premiums, set the highest deductible you can afford.
4. To save money on auto insurance, use the same company that you use for your home insurance.
5. It does not hurt to ask for discounts when buying auto insurance.