Experts will always tell you to purchase as much auto insurance as you can afford. But that won’t be helpful unless you understand the basics of how car insurance works- and which options can work perfectly for your situation. Compare car insurance quotes only after you’ve understood the policies that are best for you. You may also want to utilize the auto insurance coverage calculator to determine what other motorists in your state are using.

Did you just purchase a new car and are planning to purchase car insurance? Well, keep reading to learn more!

Types of Auto Insurance

According to the law, every driver or car owner must purchase liability car insurance. And this is typically one of the most expensive types of coverage.

While collision coverage, which often pays for your car repairs if you’re at fault, can be pricey, other options like gap coverage, rental reimbursement, comprehensive coverage, and uninsured or underinsured motorist coverage can provide additional protection for a slight price increment. Of all other optional types of insurance, comprehensive coverage will usually be the most expensive, but it’s normally half the price of collision or liability coverage.

If you want to protect your car against things such as fire, vandalism, and theft, then go for a comprehensive cover. Considering the high number of uninsured drivers, uninsured motorist coverage is equally important.

Understanding the Criteria

Different companies utilize different criteria when evaluating an insurance application through a process referred to as underwriting. They all have several guidelines regarding which vehicles they want to approve and how much they’ll charge. The rules are different for each company. That’s why two companies comparing the same driver can arrive at vastly different conclusions.

Car insurance applicants are usually placed in a particular group based on the amount of money as well as how many claims the company believes it can be able to pay. With the aid of advanced software, underwriting is automatically done behind the scenes. The company will also look at your motor vehicle records to check how many accidents or tickets you’ve received. Most insurers also utilize an insurance history report to determine if you’ve made any auto insurance claims.

At this point, the insurance firm will look at your motor vehicle records to check how many car accidents or tickets you’re received. Besides, most insurance firms also utilize an insurance history report to establish if you’ve made any auto insurance claims, and what extent of compensation was given. Although accidents plus violations can only impact the rates you receive for 3 years, most companies will look back at least 5 years when deciding whether or not to offer you insurance. Drivers with poor credit history often tend to pay more.

Different Companies Offer Different Rates

Not all companies offer the same car insurance rates. That’s because each firm utilizes its own formula to assess risk and decide on you’ll need to pay for coverage. No two insurers will have similar prices for the same policy. So, if you don’t take time to compare rates, you might end up overpaying.

Auto insurance is an extremely competitive business. And one of the best ways to cut down on insurance costs is to simply shop around. Always settle for an insurance firm that’ll provide an affordable price along with excellent service. 

Most insurance firms view drivers who’re licensed but don’t possess insurance as risky and irresponsible. So, if you wait until your policy lapses, you’ll probably spend more when purchasing car insurance.  If you intend to let you expire before you can switch car insurance companies, then you’re wrong. To be on the safe side, ensure that you buy car insurance before the current policy is canceled.

Higher Deductibles Can Reduce Your Premium

Insurance costs usually vary from one company to another. If you decide to pay for a greater portion of your own damages by increasing your deductibles, then the insurance company will automatically know that they won’t need to pay so much for your claims. And because of this, they’ll definitely give you a lower premium. But before you decide to increase your deductibles so as to save money, check your earnings. In case you’ll need to make a claim, you should be able to pay the deductible.

Insurance discounts can make a big difference when it comes to things like anti-theft devices, safe driving record, electronic payments, car safety features, and payment in full. Ensure that you’re getting rewarded for your safe driving skills by shopping around for an auto cover that appreciates your record.

Your Vehicle Type Can Affect Your Rates

The Highway Loss Data Institute (HLDI) usually compiles insurance accident statistics for various types of cars. And most insurance firms use will use this data when setting prices or premiums on your insurance. For instance, if the vehicle you drive is expensive to repair, the insurance company will have to pay more in case you’re involved in an accident.

On the other hand, if the vehicle you drive is highly safe and offers optimal protection for occupants, your insurer won’t have to pay as much in the event that you’re involved in a crash. And if your car model is less likely to be stolen or vandalized, your auto insurance company is less likely to pay for its replacement. This, in turn, reduces your premiums significantly.

The Bottom-Line

All the above factors can either raise or lower the car insurance quotes you receive. So, it’s worth keeping insurance in mind when shopping around for your next car. Since rates aren’t just based on the type of vehicle you drive, your overall rate might be higher or less than that of someone driving the same type of car.