Car insurance: Everything You Need To Know

Car insurance is a type of insurance that can cover physical injury, damage to the vehicle, or damage to other property. Depending on the type of policy you have, car insurance covers all parties involved in an accident or just innocent drivers. The Zebra points out that most states require drivers to purchase auto insurance.

Types of Car Insurance

Although most states require you to have a minimum amount of liability insurance, you can purchase a supplemental insurance policy for extra protection. Comprehensive car insurance and collision insurance are good investments if you have an expensive vehicle or are often on the road. Here's what each type of car insurance covers, according to Liberty Mutual:

Liability - if you are responsible for an accident caused by you, your liability insurance will cover the cost of vehicle repairs and medical treatment for other drivers involved. Liability insurance can protect the responsible driver's assets if another driver decides to file a lawsuit.

Collision-a collision policy will cover damage to your car if you hit another vehicle or object. Many states allow drivers not to purchase collision insurance.

Comprehensive-a comprehensive insurance policy protects your car from almost everything that could happen to it other than a collision. This includes everything from theft to hail damage. If you rent a car or finance your vehicle, the finance company may require you to purchase comprehensive insurance.

Comparing Insurance

Although car insurance is often a significant expense, you can save money if you take the time to compare. As the Zebra notes, insurance rates vary greatly from company to company, even for the exact same driver. Insurance rates tend to increase over time, but they can also fall. If you already have insurance, you may want to do some more benchmarking to see if your provider still offers the lowest rates.

Remember that any company you ask for an offer from must be willing to give it away for free. Although some insurance companies require you to pay a small down payment to start your policy, they should not charge you for a quote. According to NerdWallet, here are the steps you should take when you're ready to get started

How Do Insurance Companies Calculate An Offer?

In calculating an offer, the insurer looks at the driver's full profile to assess how risky it is to insure the driver. According to The Zebra, your driver profile includes:

Your location-if you live in a zip code with a high rate of theft and uninsured drivers, or a congested area where drivers often file claims, the insurance company will consider you a higher risk of being insured. Your premium will be more expensive even if you have never filed a car insurance claim before. You'll also have to pay more for premiums if you live in a no-fault state like Michigan, which requires drivers to purchase unlimited personal injury protection.

Your identity-age, gender, marital status, home ownership status, education level, and your credit score all affect the cost of your auto insurance. Younger drivers are more at risk for insurance because they don't have as much road experience, and statistically cause the most accidents, especially male drivers in their teens. Insurance companies consider married drivers to be at lower risk because they tend to share the responsibility of driving. Homeowners can expect to pay lower premiums because insurance companies consider them more financially stable. You are also considered less at risk if you have a Master's or Ph.D. Credit scores have the greatest impact, with drivers at the "very bad" level paying the highest premiums.

Insurance history-if you only buy the minimum amount of car insurance, the insurance company will assume you are insufficiently insured and are at greater risk than the driver who bought the additional protection. You can also expect a pay higher premiums if you have gaps in your coverage history. Drivers with a history of persistent coverage, higher limits of liability, and fewer claims can get cheaper deals.

Driving habits - when calculating your car insurance quote, the insurance company will also consider how many miles you travel and whether you use your vehicle for work or leisure. Drivers who use their cars for business purposes tend to spend more time on the road, thereby increasing the risk of accidents. The company will also look at how many speed tickets, DUIs, and accidents are recorded in your records. If your records are clean, you can expect a pay lower premiums.

Your vehicle-vehicle m

You-luxury vehicles, high-performance vehicles, and foreign-made models are more expensive to repair, thus making them more expensive to insure. If you drive a domestic model or a vehicle that is not designed for high speeds, such as a sedan or van, you have a lower risk for the car insurance company.

Now that you know the steps you should take to compare insurance quotes and what influences the determination of those quotes, you can decide which type of protection is right for you.

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