Car Insurance Explained : Car insurance can help cover costs for vehicle damage, injuries and other expenses related to an accident. Each state — while operating under broad rules set by the U.S. federal government — makes individual laws and requirements for car insurance. So you need to check local regulations to confirm that you’re playing by the rules. Car insurance also protects you and your property if you have an accident.
The best car insurance coverage types
When you purchase a car insurance policy, you’re usually offered several different types of coverage. Of the eight, five are classified as core coverage, while three are extras or add-ons. Here’s a brief overview of these types and how they help protect drivers.
The main types of car insurance coverages:
Liability coverage: Pays for injuries or damages to others when you’re at fault in an accident. (Except in New Hampshire, which does not require liability coverage.)Comprehensive coverage: Covers noncollision damage (theft, vandalism, natural disasters, etc).Collision coverage: Covers damage to your vehicle in a collision, no matter who was at fault.Personal injury protection (PIP): Pays your medical bills and those of your passengers, no matter who is to blame.Uninsured/Underinsured motorist coverage: Protects you if you’re in an accident with someone who doesn’t have enough insurance or no insurance at all.
Other types of car insurance coverage:
Medical payments coverage: Pays for medical costs after an accident, no matter who is to blame.Towing and labor coverage: Will pay for towing expenses and labor costs if your vehicle breaks down.Rental car reimbursement: Pays for use of a rental car while your vehicle is in shop for repairs due to a covered event.The first step in finding the best car insurance policy is understanding the types of coverage available. Now, let’s take a look at how different things affect the cost of your car insurance.
Things that affect the price of your car insurance
Car insurance premiums are costly, and their cost can vary for some reasons. Each state has its own laws, which is why it’s a good idea to research the specific rules in your state that can help you avoid surprises. Some typical variables that insurers use to determine premiums include:Driving record: A clean record on the road can help reduce your premiums. Texas and California, for example, both use traffic offenses, accidents and claims to help determine rates.
Age: Young drivers, particularly those under the age of 25, generally have higher premiums because of a lack of experience. Though this varies by state, seniors could benefit from lower rates.Your location: Urban areas usually experience higher premiums because of more traffic and accident risks. For instance, while people are paying more for car insurance premiums in major cities like New York, it is assumed that car insurance is generally inexpensive in rural areas.
Vehicle type: High premiums are common for sports cars, luxury vehicles and the like because of their repair and replacement costs. Vehicles that have safety features, such as airbags and anti-theft devices, tend to lower premiums.
Discounts — Many insurers provide discounts for safe driving behavior like completing defensive driving courses or maintaining a clean driving history. For instance, insurers in both Texas and California might offer discounts for bundling policies or driving a smaller number of miles.
Insurers evaluate these variables to manage risk and set your premium. Although you can’t change some factors — like your age or driving record — you can save by driving safely, picking a vehicle with a good safety rating and researching the many available discounts.