How to Choose Your Car Insurance Coverage: A Guide

Unfortunately, very few people know their car insurance coverage in-depth until they have an accident. It is only in having an accident that they learn whether or not their coverage is lacking. Understanding what is covered is important both for protecting your health and your assets. Read on for your guide to the different levels of coverage. 

The Basic Levels of Coverage

There are three basic levels of car insurance coverage: liability, collision and comprehensive. Liability insurance is the most basic level of coverage, and it is required as a minimum in most states. Firstly, liability insurance essentially only pays out for the damage you do to other people as a result of an accident. In addition, third-party personal injury and death claims are covered, as is third-party property damage. 

Next is collision insurance; this is often added to liability. Collision insurance coverage pays to repair your car after an accident. If you have a loan on your car, you will likely need to take out this level of coverage. Think about it like this: the car is not really yours; it belongs to the bank, and they do not want to be stuck with a wrecked car.

Lastly, comprehensive insurance is – as the name suggests- the highest level of coverage that you can get. Often comprehensive cover is on top of the two mentioned above, and it means that your car is covered for most forms of damage, whether the result of theft, vandalism, fire or water. That being said, your level of coverage will depend on the value of your car. Often, if it is worth less than $5,000, 

it is recommended that you stick with liability only. 

When you have chosen your level of coverage, you can begin to compare car insurance quotes. There are a lot of different providers out there, all of which are suited to different people. For example, The Hartford exclusively insures Older adults and AARP members.

Optional Extras

While the three main types of coverage are listed above, you can discuss a few extras with your insurance provider. Firstly, medical costs or personal injury protection. This covers the cost of medical bills for the policyholder and any passengers in the vehicle. However, if you have a good level of health insurance coverage, it may be unnecessary as your health insurance should cover the cost of your medical bills.

What is your insurance provider’s stance on uninsured motorists? Some providers refuse to cover policyholders for any damage that occurs as a result of an accident that involves an uninsured driver. You should check your provider’s stance on this, and you may want to think about adding it to your policy. 

Lastly, does your insurance cover the cost of towing or a rental if your car breaks down? If your car cannot be driven because of an accident or a breakdown, do you have the right coverage for roadside assistance or insurance to recover your vehicle? If your car remains undrivable for a time whilst it is being repaired, will your insurance cover the cost of a rental? Again, double-check your policy to see what the small print specifies. 

Factors That Affect Your Rates

The level of coverage and any extras you choose will affect your premiums; however, there are several other factors that could impact the price you pay. One of the unexpected influences of your premium is your demographics. Your age, gender and locale will all affect your rates. For example, younger drivers are often charged more, as are city dwellers. It comes down to statistics and who is more likely to make a claim. Your profile as a driver has also affected your rates and demographics; your driving habits are also taken into account. What is your annual mileage? Where is your car parked most of the time? These things will also affect your rates. 

Your deductible also affects your rates. If you are willing to agree to a higher deductible, then you can often lower your premium. However, this does mean that in the event of an accident, you will be responsible for the initial costs up to the deductible, so you should only agree to what you can easily afford. If you have made claims in the past, then this will also affect your rates. Accident-prone drivers are charged more, so try to keep your claims to a minimum if possible. 

Lastly, vehicle choice and any modifications to the car will affect your premiums. Expensive cars obviously cost more to insure than cheaper ones; sports cars cost more than sedans, etc. Any modifications to your car will also change the amount your insurance provider will charge. For example, what safety devices are installed in your vehicle? Are there any theft deterrent systems? Having these in place can lower your premiums, although if they differ from your manufacturers’ specs, this can also affect your premiums. 

In Conclusion

Making wise choices with your car insurance is important for your health and your wealth. Make an effort to really think about the coverage that you need. You should also read through your policy before you sign so that you understand exactly what you are being offered. You do not want to be let down if you have to make a claim.

Photo by Sarah Brown on Unsplash

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