Table of Contents
Here are the list of things we’ll cover in this post:
1. Auto Insurance: what is it all about?
A. Auto Insurance: what is it all about?
Recently, a friend of mine asked me on Facebook what auto insurance is all about. To proffer solution to that, we’ve decided to compile a simple post like this one believing that it’ll be of help to as many of the persons who are also in dire need of what this insurance policy is about. To complement it, we’ve also included in the latter part of this post some basic facts about this imsurance policy.
Alright, whether you’re a new driver or just want to know a little more about the how and why, it’s good to start with a basic definition of auto insurance. In a simple terms, auto insurance is an agreement between you (the car owner) and your insurance provider about what would happen in the event of an accident. It protects you from financial losses in the event of incidents covered by your policy.
Rather than being on the hook for things like repair, replacement costs and even medical bills, you pay a car insurance premium to your insurance provider and they will help cover the costs based upon the coverage and limits you choose.
Your car insurance policy serves as a contract that defines what costs the insurance company is responsible for, and under what circumstances. In exchange for these services, you are required to pay a monthly insurance bill (or “premium”) to your insurer. While the basic concept of insurance is pretty straightforward, accidents are anything but. That’s why it’s important to know how auto insurance works, what each type of car insurance covers and how to choose the coverages that are right for you.
Interestingly, for more than 85 years, Safeco has delivered new and better ways to protect cars and drivers with auto insurance. If you drive a sedan, hybrid, minivan, station wagon, SUV, pickup truck or anything in between, your local independent agent can provide personalized coverage that’s right for you.
B. How Auto Insurance Works
Having given above a brief but concise definition of what auto insurance is all about, the next thing to consider here is this question: how does it work when purchasing car insurance?
As a car owner, do you just go online to purchase a car insurance without knowing what is obtainable? No. Doing that will dent a deep blow on you. To resolve that, here’s an overview of how the car insurance process works:
i. Start by getting a quote: A “quote” is another word for a car insurance estimate. Based on information about you, your history, your car and the type of car insurance you wish to buy, insurance providers quote you a price (also known as your “insurance premium”). When you get a quote with Nationwide, it’s always free and there’s no obligation to purchase. You may even be eligible for a discounted car insurance rate.
ii. Choose the type(s) of insurance you want: Liability insurance is mandatory for all U.S. drivers, though the required coverage amounts and types vary depending on your state’s laws. While some drivers opt for only state-minimum coverage, having additional coverage can provide extra protection on the road.
There are also specialized types of insurance you can choose from, such as Classic Car Insurance. If you appreciate the classics, classic car insurance coverage is specifically designed to meet your unique needs so you can hit the road with the right protection.
iii. Select your deductible amounts: A deductible is the amount you are responsible for paying out of pocket in the event of an accident before your insurance kicks in. For instance, if you have a $500 deductible but your vehicle has $1200 worth of damages, you would pay the first $500 and your insurance provider would pay the remaining $700 (if the accident is covered under your policy).
Note that a higher deductible means a lower insurance premium, but it could also mean paying more out of pocket in the event of damage.
iv. Purchase auto insurance: You can choose to pay your annual premium up front, or pay monthly. Remember to always have your insurance card (or “proof of insurance”) with you each time you drive.
v. In the event of an accident, file a claim with your insurance company as soon as possible: A “claim” is the process of giving your insurance provider all the information about the incident so they can determine if it is or isn’t covered, and how much damage they may reimburse you for.
C. Facts About Auto Insurance
Given below are some facts you need to know about auto insurance so you can have a better knowledge of what this insurance policy is all about before looking forward to purchasing one.
i. Your Credit Has An Impact On Your Insurance Rates
Whether you like to accept it or not, your credit history will have an impact on the insurance rates the insurance company will give to you. Insurance carriers and companies discovered that an individual’s characteristics predict the possibility and likeability of such individual having insurance claims. They may use scores that are credit-based in addition with other factors to assess the possibility of claims submitted.
These factors may include age, driving records, claim history, place of residence, brand of car and the average miles driven, etc. As acceptable practice, strive to improve your credit, keep a close eye on your credit report and contact the credit bureau to clear up any errors.
ii. Brand Loyalty Can Cost You
If you have a careless attitude about auto insurance, you might want to retrace your steps. Years ago, insurance companies took stock of factors when calculating your premiums. Today, that list has grown to a confusing maze of requirement causing insurance rates to be at odds greatly from provider to provider. Instead of allowing your policy to renew itself automatically, compare and shop once a year to ensure you’re getting the best auto insurance rates.
Some companies provide policies directly to consumers, while others sell policies through insurance agents or brokers. An good place to start is by getting auto insurance quotes online, which could save you money. If you’re afraid that lower rates mean less coverage or poor service, don’t be. Today, there are plenty of insurance companies that offer affordable premiums, well-rounded coverage and excellent customer service.
iii. Know That If You Stop Making Payments Now, You’ll Eventually Pay Them At The End Of The Day
If you think you can stop making payment by changing your car insurance company, think again. Of course, your policy will be cancelled, but your existing insurance company could report you to the credit bureaus for non-payment, damaging your credit score in the process.
What’s more? Your insurance history will reflect the cancellation which may in turn cause a new provider to decline your application or charge you higher premiums in the future. So instead of changing your insurance company, make sure you complete all the necessary paperwork with your existing provider, such as a policy cancellation form at the right time so you can be starting your new policy on the date your old policy ends or expires.
iv: Your Car Insurance Company Can Cancel Or Refuse To Renew Your Policy At Any Time
Your insurance company can decide to cancel or refuse to renew your policy at any time if you violate one or more of its guidelines during your policy period. Things such as failing to pay your premium on time, losing your driver’s license due to suspension or revocation, submitting too many at-fault claims, or misrepresenting your driving history or past insurance claims could all be reasons for cancellation or non-renewal. In either case, your insurance company is obligated to notify you in writing within a timeframe legally required by your state.
When it comes to cancellation, your insurance company is required by law to state the reason, but its not so with non-renewal. If you want a reason but aren’t provided with one, you must send your insurer a written request. If you believe you’ve been unfairly treated, you may have legal support or a way out through your state’s department of insurance.
Also, don’t forget about your “binding period”,: the time when your insurance company is especially conscious of your risk level. The binding period usually occurs within 60 days following your auto insurance application. If your insurer finds any inconsistency on your application, on your driving record or with your credit, it can cancel your policy.
v: Paying For Your Premium In Full Could Save You Money
You may be surprised to know that most car insurance companies charge an administrative fee to split your premium payments into installments, such as paying every six months, every three months or every month. The more you divide your payments in installments, the more these “convenience fees” add up, and before you know it, you will be paying substantially more than you thought. Bear it in mind that for each method of installment payment you choose, such as automatic bill pay or pay-by-phone, there may be charges attached to it.
Remember to ask your provider what its administrative fees are. If it makes financial sense and you can do it, pay your premium up front and in full. Not only will you avoid the additional expense, you won’t have to worry about missing a payment, or being late on payments, both of which could be grounds for cancellation. Other factors, such as the brand of car you drive, can cost or save you money on car insurance as well.
D. Why Do I Need Car Insurance?
Insurance is smart planning that can help protect you from expensive, sometimes devastating surprises.
E. How To Compare Car Insurance Quotes
Are you shopping for car insurance? If yes, here are the few things you need to know about car insurance quotes. If you’re getting quotes from several insurers, make sure you’re doing an accurate comparison:
Select the same set of coverages, coverage limits and deductibles for each quote you get. In addition to choosing coverages and coverage limits that meet your state’s requirements, you may also want coverages to help protect your vehicle, such as collision coverage or comprehensive coverage.
If you add collision coverage to one quote, make sure to add it to the others. Also, some coverages, like collision coverage, come with a deductible. You may be able to choose your deductible amount — for example, $500. Remember to select the same deductible amount on each coverage, for each quote you get.
Once you’ve gotten several car insurance quotes with the same coverages, limits and deductibles, you can see how each insurer estimates your premium based on the factors you chose. Then, you can select the policy that best fits your needs.