Auto
Insurance
How does Auto Insurance work? What should one consider while taking Auto Insurance?
If you own a car, auto insurance is a legal necessity. Auto insurance protects you against financial loss in the event of an accident. If you are involved in an accident or your car is stolen, owning the right kind of auto insurance can help you recoup your losses. When you buy auto insurance from an insurance company, a contract is established between you and the insurance company. You agree to pay the monthly premium and the insurance company agrees to pay your losses as defined in your policy.
Insurance can cover some or all of the following items:
• The insured party
• The insured vehicle
• Third parties
In most countries it is compulsory to purchase auto insurance before driving on public roads. In the United States, penalties for not purchasing auto insurance often involve a substantial fine, license and/or registration suspension or revocation. Typically, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle. Coverage against loss of or damage to the driver's own vehicle is optional. Most auto policies are purchased for a period of six months to a year and renewed.
What to consider before buying auto insurance?
§ Licensing: Buy from a company licensed in your state, because then can you rely on your state insurance department to help if there’s a problem.
§ Price: Many companies sell insurance policies and prices vary greatly from one to another. Get at least three price quotes from companies and compare the costs.
§ Financial Solidity: Check the financial health of insurance companies through independent rating companies and consumer magazines.
§ Service: Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and quickly. Check a national claims database to see what complaint information it has on a company. Ask friends and relatives for their recommendations.
§ Security: Many insurers offer discounts for features that reduce the risk of injuries or theft. These include air bags, anti-lock brakes, daytime running lights and anti-theft devices. Some states require insurers to give discounts for cars equipped with air bags or anti-lock brakes.
§ Higher deductibles: Deductibles are the amount of money you pay on a claim before the insurance company reimburses you. The higher your deductible, the more money you can save on your premiums. The typical deductible is at least $500. If you can raise your deductible to $1,000, you could save up to 25%.
§ Buy your policies from the same insurer - Buy your auto and home insurance with the same company as this could yield a discount of up to 30% on the combined premiums. Also you may get a reduction if you have more than one vehicle insured with the same company.
§ Restricted mileage - Discounts are given for doing 12,000 miles per year or less. The lower the mileage the greater discount you can get. But if you exceed the agreed limit you will be penalized heavily when making a claim.
§ Group insurance: Being a member of a certain professional groups like a teachers' association could also qualify you for a discount.
