CAR INSURANCE: Basic Information

1) What is car insurance?

Car insurance helps to protect against financial loss if you met with an accident. It's an agreement between client and the insurance service provider. Client agrees to pay the premium and the insurance company assures to pay his/her losses as defined in the policy.

Car insurance provides liability, property and medical coverage:

* Liability coverage pays for client’s legal responsibility to others for bodily injury or property damage.
* Property coverage pays for any damage or theft of client’s car.
* Medical coverage pays for the cost of treatment of injuries, rehabilitation, sometimes lost wages and funeral expenses to.

A car insurance policy consists of six different kinds of coverage. Most states require client to buy some of these coverages. Most car policies are for six months to a year. Insurance Company notifies to the clients by mail when it's time to renew the policy and to pay their premium.

2) What is covered by a basic car policy?

a. Bodily Injury Liability: This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else.

b. Medical Payments or Personal Injury Protection: This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car.

c. Property Damage Liability: This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property.

d. Collision: This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over.

e. Comprehensive: This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

f. Uninsured and Underinsured Motorist Coverage: This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

CAR INSURANCE: How to Buy & Save Money

1) How to choose an insurance company?

The main criteria for choosing an insurance company are listed below.

a. Licensing:
Not every company is licensed to operate in each state. As a general rule, you should buy your policy from a licensed company in your state, because then can you rely on your state insurance department in case of any problem.

b. Financial Solidity:
You buy insurance to protect you financially and provide peace of mind. Select a company that is likely to be financially sound for many years, by using ratings from independent rating agencies.

c. Price:
Many companies sell insurance policies and prices vary from company to company. Get at least three price quotes from agents, companies and through the Internet. You may get a guide from your state insurance department that shows what insurers charge for different policies in various parts of your state.

d. Service:
Your insurance company and its representatives should answer your queries and handle your claims efficiently, fairly and quickly. You should look at the reputation of the insurance company and the agent through a good market survey. You may also want to check a national claims database to see what complaint information it has on a company. Also, your state insurance department can give you a good account of the insurance company you are choosing for their consumer complaints about its service relative to the number of policies it sold.

e. Comfort:
Ensure your comfort with your insurance purchase, whether you buy it directly from the company over the phone, or over the Internet, or from a local agent. Make sure that the agent or company will be easy to reach in case you have any question or need to file a claim.

2) How can I save money?

There are many factors on which your price of insurance depends. The price of insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from and what type of car you have. Here we suggest you some ways to save money.

a. Shop around:
Prices of insurance can vary from company to company, so it pays to shop around. Get at least three to four price quotes. You can call insurance companies directly or access information on the Internet. Your state insurance department may also provide comparisons of insurance prices charged by major insurance companies.

Get some good quotes from different types of insurance companies. Some sell policies through their own agents. These agencies have the same name as the insurance company. Some sell through independent agents who offer policies from several insurance companies. Many companies sell directly to consumers over the phone or through Internet.

But don't shop by price alone. Choose such a company that can answer your questions and handles claims efficiently and fairly. Take recommendations of your friends and relatives. Contact to the state insurance department to find out whether they make available consumer complaint ratios by company.

b. Before you buy a car, compare insurance costs:
Before you buy a new or used car, check into insurance costs. Your premium is based in part on the cost to repair it, car's sticker price, its overall safety record, and the likelihood of theft. Many insurance companies’ offers discount for features that reduce the risk of injuries or theft. These include anti-lock brakes, air bags, anti-theft devices and daytime running lights. Some states require insurers to give discounts for cars equipped with anti-lock brakes or air bags.

Cars that are favorite targets for thieves cost more to insure. Information that can help you decide what car to buy is available from the Insurance Institute for Highway Safety.

c. Buy homeowners and car coverage from the same insurer:
Many insurers will give you a discount if you buy two or more types of insurance from them. Also you may get a reduction if you have more than one vehicle insured with the same company. Some insurers reduce premiums for long-time customers. But shop around; you may save money buying from different insurance companies despite the multi-policy discount.

d. Reduce coverage on older cars:
Consider to drop collision and/or comprehensive coverages on older cars. It may not be cost-effective to continue insuring cars worth less than ten times the amount you would pay for coverage. Any claim payment you receive would not substantially exceed your premiums minus the deductible. Claims occur on average only once every 11 or 12 years.

e. Low-mileage discounts:
Some insurance companies offer discounts to motorists who drive a lower than average number of miles in a year. Low mileage discounts can also apply to drivers who carpool to work.

f. Maintain good credit:
Your credit rating may affect what you pay for insurance, so keep a close eye on it. Credit makes insurance rates more fair, accurate and objective. While the use of insurance scoring varies from company to company and state to state, it's a fact that drivers with long, stable credit records have fewer accidents than drivers who don't. There are various Internet services that allow you to check your credit rating and provide tips on how to improve your score.

g. Ask about group insurance:
Some insurance companies offer reductions to drivers who get insurance through a group plan from their employers, or through professional, business and alumni groups and other associations. Ask your employer or any groups or clubs to which you belong.

h. Look for safe driver discounts:
Insurance companies offer discounts to policyholders who have not had any accidents or moving violations for a number of years. You may also qualify for a cut if you have recently taken a defensive driving course.

3) How much coverage do I need?

Almost every state requires you to buy a minimum amount of liability coverage. Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits. If you are found legally responsible for bills that are more than your insurance coverage, you will be required to pay the difference from your own pocket. These costs could wipe you out!

In addition to liability coverage, consider buying comprehensive and collision coverage. You do not decide how much to buy. Your coverage reflects the market value of your car and the cost of repairing it.

Decide on a deductible-the amount of money you pay on a claim before the insurance company reimburses you. Typically, deductibles are $500 or $1,000; the higher your deductible, the lower your premium.

4) What determines the price of my policy?

The price you pay for car insurance depends on many factors. The average American driver spends about $700 in a year. Your premium may be higher or lower, depending on:

a. The number of miles you drive each year:
The more you drive, more are the chances for accident. If you drive lower than a average number of miles per year i.e. less than 10,000, you will pay less. For instance, some companies will give discounts to policyholders who carpool.

b. Your driving record:
The better your driving record, the lower your premium. If you have had serious traffic violations or accidents, you will be required to pay more than if you have a clean driving record. You may also pay more if you haven't been insured for a number of years.

c. Your age:
In general, mature drivers have lower number of accidents than less experienced drivers, particularly teenagers. So insurance companies generally charge more if teenagers or young people below age 25 drive your car.

d. Where you live:
Insurers look at local trends, such as the number of accidents, car thefts and lawsuits, as well as the cost of car repair and medical care.

e. The car you drive:
Some cars cost more to insure in comparison of other. Variables include the cost of the car, the cost of repairs, likelihood of theft and the overall safety record of the car.

5) What information do I need to give to my agent or company?