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Auto Insurance

Insurance is as much of a necessity of owning a car as gas. You just can't do without it. As a matter of fact, most states won't even let you register a car without it.

What Is Insurance?
Insurance is almost a reverse gambling. You keep putting money in a pot to avoid hitting the big jackpot - an expensive accident settlement.

An insurance company adds up all the accident claims it expects to pay, and divides that amount between all the people that pay into the insurance. Of course, each insurance customer isn't charged equally. Your rates are determined by how likely you are to have a claim. That is determined, fairly or unfairly, on basic demographic and driving statistics - statistical risk factors.

Where Do Rates Come From?
Your rates depend on three things: who you are, your driving history, and how extensively you want to be covered. More specifically, the following factors have a great influence on your rates:

  • Gender
  • Age
  • Marital Status
  • Personal Driving Record
  • Vehicle Use
  • Type of Vehicle
  • Size of your Deductible
  • Type and Level of Coverage

Types Of Insurance
There are so many variables with insurance that the best way to find out which is right for you is to ask your agent. But if you understand the basic coverages, it will help you work together with your agent.

  • No-fault Insurance Some states are no-fault states and some are fault states. You don't have a choice on this one - it depends where you live. No-fault insurance bypasses the conventional legal procedure that finds fault in an accident. No lawyers, no court, no judge, no jury to prove the accident was the other person's fault. It saves on taxpayer legal bills and helps keep rates down because it reduces the amount of legal fees an insurance company pays. If you are in an accident, your insurance company compensates you. They will go after the other driver if possible. Claims over a certain dollar amount, however, automatically initiate legal action.
  • Fault Insurance If you live in a fault state, you will be required to prove that you have "financial responsibility" - you're able to pay for any damage or injury that you may cause. Either fulfill minimum insurance requirements or have proof that you have the financial means to pay for such amounts.
  • Uninsured Motorists and Underinsured Motorists If you are involved in an accident with someone who can't pay for the damage or injury caused, your insurance company will pay all your claims or the difference between your damages and what the other person's insurance covers. These policies protect you against damage costs including lost wages, medical bills, pain and suffering.
  • General Liability This is the coverage you want everyone else to have. If someone causes damage to your property or causes you injury, that person's insurance will cover it. It covers damage you may cause to other people's property and injuries to the people themselves. It offers protection from lawsuits. But often state minimum standards are much lower than you would actually need. If someone is seriously injured, medical bills can be in the hundreds of thousands. Consider getting higher liability coverage to prevent being underinsured.
  • Collision Collision insurance will reimburse costs related to repairing damages to your car due to an accident. It usually covers you even when you drive a rental or someone else's car. Often this type of coverage is required to lease or get a loan for a car.
  • Comprehensive Incidents other than collisions are covered by comprehensive. That usually means fire and theft, but can also include natural disasters, riots, explosions or falling objects. This is also required for a lease or a loan.
  • Medical Payments Insurance If you're in an accident and need to be taken to the hospital immediately, you're covered for hospital and doctor bills or, if it was a very serious accident, funeral expenses. This overlaps with health insurance, so ask your insurance agent exactly what you need.
  • Personal Injury Protection policies cover medical charges not covered by the Medical Payments Insurance - lost wages, child care that you are unable to perform, etc.

Ways To Save On Insurance

  • Comparison shop.
  • Raise your deductible
  • Drop collision and/or comprehensive on old or cheap cars
  • Buy a car that's not in demand
  • Take advantage of low mileage discounts
  • Equipment discounts for safety features
  • Multiple insurance plan discounts for using the same company for auto, life, health and home insurance.
  • Inquire about other discounts such as those for safe driving records.

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