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The importance of Car Insurance is not overestimated. Let's face it: owning and operating a car requires a great amount of responsibility and - Auto Insurance. You can't drive a car without a valid Auto Insurance policy, and if you are found driving without one, you will be severely fined or even sentenced to jail. Drivers tend to grumble about their Car Insurance monthly at policy renewal times and the only time they speak about their Auto Insurance more kindly is when filing an Auto Insurance claim if they get in an accident.
Most of us do not question the necessity of being covered by Auto Insurance. The statistics and common sense prompt us to be careful and forward-thinking. In the United States, within a five-year period over 25 percent of all car drivers somehow got involved in car accidents. Car crashes-related expenses of Americans amount to over $720 million annually. Every 13 minutes one person dies in a car accident. Every 26 seconds a car is stolen. We believe in your luck, but bearing all this in mind, safe driving and the right Car Insurance coverage are more than necessary.
Before you start shopping for Car Insurance, you are recommended to study your state's Auto Insurance requirements in order to learn how much coverage you need by law and then determine your own Car Insurance coverage needs that go beyond the legal minimum.
Types of Car Insurance
The major Auto Insurance types include:
Liability (Bodily Injury Liability Insurance and Property Damage Liability Insurance):
The only states that don't require liability coverage are New Hampshire, Tennessee and Wisconsin, and if you don't reside in one of those states, this coverage is imperative.
Liability Car Insurance protects your bank account in case you are liable for damaging the other person or his/her car. It covers any injuries or damages to property that you might cause during an accident.
In case you get in an accident and you are at fault for other people's bodily injuries or death, Bodily Injury Liability (BI) will cover medical bills, pain or suffering, loss of income of another party in an accident and a legal defense if they file a lawsuit against you. Mind that Bodily Injury Liability does not cover you or other people on your policy and is strictly limited to the terms and conditions of your policy.
Property Damage Liability (PD) will provide you with legal defense and cover you if you get in an accident and your car happens to damage someone else's property: another party's car, a house, a fence, or any other property. It is important to have enough coverage for the amount of damage your car might do to another party's property.
Collision: This coverage protects you regardless of who is at fault for an accident. It will pay for any repairs your car requires as well as for the replacement of its market value if after an accident your vehicle is beyond repair. The principle difference between Collision and Liability Insurance coverage is that Collision covers damage caused to your own car while Liability pays for damage you cause to the other party. Basically, the safer a driver you are, the less you need this type of insurance.
This is the most expensive optional coverage. However, finance companies and lessors require that the car owner insure their car fully comprehensive. This coverage pays for repair works or the replacement of your car if it is stolen or damaged. Comprehensive coverage protects against disasters, such as theft, falling trees, and most acts of nature, fire, vandalism, animal accidents, etc.
Many Car Insurance companies choose to insure only 80% of the value, refusing to cover 100%. It is done to prevent fraudulent losses of cars when some car owners just feel like recovering their fininacial position. Therefore, it is necessary to thoroughly scrutinize what is covered and what is not covered in your policy.
There are several other types of Car Insurance. For instance, Medical Payments Coverage pays medical bills and funeral costs following road accidents. Injured person (including cases when it is a pedestrian or biker) is covered regardless of who is at fault for the accident. Medical insurance may or may not include disability insurance and pain and suffering compensation. Personal Injury Protection (PIP) is very similar but can also cover the cost of care after the accident and up to 80% of lost income.
Uninsured or Under-insured Drivers Insurance pays any costs due to damage and injuries caused by a driver who is uninsured or underinsured. It also covers damages by hit-and-run accidents. This type of coverage is a good idea, taking into account that abut 17% of drivers fail to have an adequate insurance coverage.
There are also Glass Replacement Insurance, Towing and Labor Coverage and Rental Reimbursement Coverage, and other Car Insurance low-cost additions, which you can add to your policy as your situation requires.
Choosing the Right Car Insurance Coverage
Americans pay about a thousand dollars as their Auto Insurance premiums annually. However since individual Car Insurance coverage needs can be quite specific, Auto Insurance premium rates also vary. They depend on the driver's age, his/her driver's record, the type and the age of the car, the car's safety features, the driver's location and many other factors. It all counts: your occupation and the state you reside in, the neiborhood you park your car in, the density of traffic in the area you live and work, the cost of your car and whether you have had a history of accidents and offences. All these factors make up the actual sum of the premium you pay. When making up your mind as to what coverage to purchase, your ultimate goal is to shop around and get the best available cover at the best available price.
Remember that the declared value of your car at the time you acquired your policy may not be the exact amount you receive in the insured event. It is well-known that all cars go down in price and eventually worth less than their initial value. Thus, if you were involved in an accident and your car was declared a total loss, you should understand that in all likelihood you would be offered less than your car costed you. Many Insurance Companies will now offer you a replacement car of similar type, age and mileage to the one you have lost.
With many Insurance Companies it is possible to get a discount if you have two or more policies with them, and many companies offer benefits, such as a free courtesy car in the case your own car is non-operational due to an accident. However, logically, the more benefits your Insurance Company offers, the higher is the price that you have to pay. According to Consumer Reports, when you see that the cost of your premium runs up to 10% of your car's value, you should consider giving it up.
You may choose the most convenient form and time to finance your premium with monthly or quarterly payments, or you may pay every six months. However, the longer is the time between payments, the more it adds up the cost.
It is important that you thoroughly study and understand your policy, since some types of policy wording can be rather tricky. Make sure you know your policy well and ask questions before you purchase it. Normally, it pays to get as much insurance coverage as you can painlessly afford, since even the smallest accident and eventual slight damage might end up in heavy expenses.