Auto Insurance is mandatory as much as auto. When we get to hear about an accident we feel pity for the people with whom it happens momentarily or if someone passes away we pay our condolences. Nobody ever thinks that it’s going to happen to them. But the bitter truth is that in USA an accident occurs every 18 seconds. How much ever careful you try to be, you can always meet an accident due to somebody else’s fault too.
We cannot predict the future like what is going to happen with us but what we can surely do is we can be prepared for the worse situation. And in this context, we can stay prepared by opting for an auto insurance cover for the vehicles in our home and family.
Auto Insurance in USA
There are many states in the US who have made car insurance mandatory or at least they ask the drivers to prove that they are capable of paying for damages in case they are at fault in a road accident. There are certain laws for car insurance at the state level, vary across different states too. The need of having auto insurance in USA initially had a very fundamental reason being that when a car accident takes place the damages which happen to the vehicle the person at fault is unable to pay for them in most of the cases.
Understanding what auto insurance is all about
It is a kind of a contract that we enter into with an auto insurance company in which we agree to pay some money which is called as the insurance premium and in the event of an accident the company pays us for the agreed damages which are covered under the terms and conditions. The contract is usually known as the insurance policy. The terms and condition are made clear to the person seeking auto insurance by the company well in advance before signing the policy.
There is another popular term with reference to auto insurance. Deductible means the part of the cost of damages that you agree to pay from your own side apart from the company. For example, if you take up an auto insurance policy of $1000 and have $200 has deductible it means for a damage of about $1000 you will be paying $200 from your pocket.
In the event of an accident if you are responsible for causing it and damaging other vehicles the insurance policy generally covers the repair cost, legal fees and the medical expenses for those who got injuries because of the accident. The policies also cover the events when your car is lost or vandalized.
There are different types of auto insurance in USA which are offered to the customers depending on their needs and demands. Every type of insurance cover has its own characteristics, terms and conditions, varying premiums and boundaries of coverage. Some major types of auto insurance covers are explained as follows:
- Liability Insurance: This is the second type of insurance. It is mandatory because it is meant for the protection of other people and their property when the driver isn’t in a situation to compensate for their losses. In an accident, there are huge chances of having bodily injuries. You may have hit someone which might have caused bodily injuries to that person, his/ her property or may be other vehicles around etc. There is no unlimited liability as the minimum levels are set by the state laws for liability insurance.
- What happens if the liability you have after an accident is greater than the amount of insurance?
In such conditions where the damages are more than the insurance cover, the personal assets are used to pay for the damages if necessary it may go to your bankruptcy levels. It is a serious issue hence it is always advised to drive carefully. In some cases, the matters reach to the level of lawsuits being filed and in that cases, the litigation lawyers are always ready like legal vultures running the amount into millions of dollars.
- No-fault insurance:
There are many states in the US that have some form of Personal injury protection (PIP) or no-fault insurance. When you are involved in an accident you claim up to a certain amount from the insurance company you have your insurance with for your personal injury caused due to the accident. This doesn’t require you to go to court and prove that the other party was the one at fault.
Wherever the Personal Injury Protection (PIP) can be applied, it covers only the injuries which are caused to the body and no damage to the vehicle is covered. PIP provides insurance benefits for the costs of treatment in hospitals too. Apart from this the lost wages, funeral costs, death benefit are also provided depending upon the level of PIP policy. In those states where car insurance is compulsory, people are required to provide the proof of insurance at the time of vehicle registration and always carry it in their vehicles.
- Collision Insurance
This type of insurance cover is for the damage caused to your vehicle in an accident due to collision with another vehicle irrespective of the person responsible for the accident and the damage. Having a collision cover is necessary or not for you; it depends on how valuable is your vehicle. Usually, car loan or leasing companies opt for this kind of auto insurance in USA. Even if you are the one responsible for the accident the insurance company will pay for the damages to your car after you pay the deductible amount by yourself. And in a case when you are not responsible for the accident then your insurance company can ask for reimbursement from the other person involved to pay for the cost of damages to your vehicle.
In a case when your vehicle is financed by a bank loan then you are required to take this type of auto insurance cover for your vehicle.
- Comprehensive Insurance
This type of insurance cover protects you from losses/damages due to accidents not caused by a direct collision with another vehicle. IT covers various kinds of damages which are caused due to theft, vandalism, fires, falling objects, earthquakes, storms or contact with animals etc. Similar to collision insurance if the vehicle is purchased by some bank loan you are ought to buy this kind of auto insurance cover for your vehicle.
- Uninsured motorist insurance
There are also cases of hit and run accidents or the cases where the other motorists are uninsured; you should have this type of insurance. Uninsured motorist laws have been there in many states which require them to be included in the insurance policies by the insurance companies and cover the damage caused by motorists who have not insured themselves. Also, if you are already having collision insurance you don’t need to have uninsured motorist insurance.
There are prescribed penalties in many states for driving without having an insurance cover but they are less as compared to the insurance premium so that is a big reason that there still many uninsured motorists on the streets risking the lives of other as well as their own.
While realizing all the different coverage you can avail by opting for the various kinds of auto insurance plans one thing that must strike your mind is that you have to pay a premium for it. And when you are paying for something you need to make sure that you get enough valuable return for it. One way to do this is by making sure you don’t end up paying more for something than what it actually is worth of. And if there are any mean to reduce the payment you are aware of it. Same conditions apply for the auto insurance premiums.
They provide you relief and back you up in emergency condition but they are a decent enough amount to be paid. The premium for the auto insurance is made up of different components which are independent in nature and play significant roles. So it gets essential for you to know before buying an auto insurance policy that you get to understand what all factors drive your insurance premium and in what all ways you can manage to reduce the premium. Let us understand the various factors on which the auto insurance premium depends:
- Age: Insurance premiums are high for those under 27 years of age who are living in inner cities as the driving condition there are hazardous and car theft is common.
- Manufacturing of a car and its type: If a car is a very luxurious and high end, the cost for its repair will be higher so the insurance cover has to be decided accordingly and hence premium too may vary with respect to the type of car and its manufacturing.
- The age of the car and its present value: There is a huge depreciation in the value of cars year on year as consistently new models come into the market. Outdated cars have a lesser value and hence it is important for the insurance company to compute the insurance value in case a car is lost.
- Your driving experience and driving record also affect your premium as if one has a number of traffic tickets issued on his driving record then the premium goes high for such individuals.
- The health condition of the person also matters as if a person suffers from some types of illness as mentioned in the terms and conditions of the insurance company then a higher premium for auto insurance in USA has to be paid.
- Other few factors which determine the premiums for auto insurance are a number of miles covered each year, accident record etc.
As there are several factors which drive up your auto insurance premium, on the other hand, there are many ways in which you can reduce the cost of getting auto insurance. They are described as follows:
- Compare the premium offered by various insurance companies in your state and choose the best one that fits your need and the budget.
- Getting your car insured with a household insurance company may fetch you a discount of 5-10% on the premium.
- Other kinds of discounts are offered to good drivers like those who haven’t filed an insurance claim in last 3-4 years and also if you own more than one car it reduces the overall cost by getting some discount on both premiums.
- If you have an employee hospitalization plan, you can think of dropping your auto insurance medical payments as they duplicate the medical insurance you already have.
Amidst all these tips one important thing which you must not do in order to reduce your auto insurance premium is that you must never reduce your liability limits. Also, there is no relation between the premium you pay and the service you get. Paying a high premium doesn’t ensure you get a good service. Also, if you cannot pay the premium at once there are options that allow you to pay in quarterly or monthly installments.
Always keep in mind these things to get a hassle free claim later
- While filling the proposal form always make sure that you mention all the previous accident that have happened with you and all the driving laws you have broken. As if you fail to do so the insurer may refuse to pay the claim in any event in future.
- Your policy may also be cancelled if you are caught drunk driving, exceeding the speed limit or reckless driving resulting in any injury or death of a person.
With so many auto insurance service providers it gets very confusing to choose one particular insurance service provider. And in this situation what most of the people select the one which has the lowest premium and hence end up committing the most common mistake. So how should be a good auto insurance service provider be selected?
- Be clear about the priorities of having an auto insurance plan for your vehicle. What all you wish to get covered and how much is your budget for the premium. Understand the coverage and the facilities that you are looking for by getting an auto insurance plan. Whether you are looking for the cheapest plan available or you are looking for a good customer service. An ideal company will be the one which provides great coverage with that too at affordable prices as per your budget and doesn’t give you a chance to complain about the customer service.
- After you have shortlisted a few auto insurance companies what you need to do next is do some investigation about those companies. This is by checking the reputation of various companies which provide auto insurance in USA and also check their financial standings.
- The primary step is checking the website of your state’s insurance department and verifies that the company is listed and licensed to sell the auto insurance plans or not. Enquire about the complainant ratios and search if they are available on the internet.
- Look at the financial position of the company on popular websites and the company’s financial statements. As you know that auto insurance is a two-way affair, where you pay the premium and company pays you the coverage in the event of an accident. So there is no harm in making sure that will a company be able to pay you off in future.
- Never settle for just looking at one or two auto insurance companies, always look to compare at least three-four companies before finalizing one. Read the online reviews about the company and talk to your friends and relative who are already having an auto insurance plan of that company as there is no better review than the word of mouth opinion.
- Ask a few questions to them about their satisfaction with the services of the company and their premium rates. Look for the discounts and offers which the companies offer on auto insurance plans to attract the customer. There is always added benefit if you get to have a good deal on auto insurance in USA.
- Ask for bundling of the auto insurance plans if you have more than one vehicle at your home and also enquire about any good drivers rewards offered by the company.
- These days every company maintains a page on social media websites. A lot of useful information is available there which can help in the decision making and also evaluate their responses by posting queries.
- Always remember that cheapest plan isn’t always the best plan.
Auto insurance in USA is meant for your safety and good. They help you to protect your property and it is your responsibility towards your vehicle is to get it insured. In this way, you make sure that you are prepared for facing these situations and you have finally understood a simple fact that accidents do happen.