Car insurance: what you need to know

Vehicle accidents or theft happen, and when they do, car insurance can help you to keep your finances safe and sound. Car insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy. How much car insurance coverage helps, however, is up to you, and this is determined by the combination of options that comprise your insurance policy. Policies are generally issued for six-month or one-year timeframes and are renewable.

In the other hand, driving without vehicle insurance, it’s against the law, so before you can drive legally, you must first buy a car insurance, but choosing the best car insurance isn’t as simple for most of the people, because there are many types of vehicle insurance designed for different circumstances. Let’s take a look at the most important information you need to know before buying a car insurance.

Types of car insurance coverage

There are many types of cars insurance in the market. They have different features and each of these features affect the car insurance rate. If you refer to the coverage, these are some of the main types of cars insurance:

  • Liability coverage. It is mandatory in most countries and it covers costs related to another person’s injuries if you cause an accident or costs related to damage you cause to another person’s property while driving.
  • Uninsured and underinsured motorist coverage. It covers costs for medical bills or repairing your car, if you’re hit by a driver who doesn’t have insurance or by an underinsured driver. In the second case, the driver has car insurance but the liability limits aren’t enough to cover your resulting medical bills or repairing your car.
  • Comprehensive coverage. It covers costs to repair or replace your car, if your car I damaged from things like theft, fire, hail or vandalism. This coverage has a deductible, which is the amount you’ll pay out of pocket before your insurer reimburses you for a covered claim.
  • Collision coverage. It covers costs to repair or replace your car, if you’re involved in an accident with another vehicle, or if you hit an object such as a fence.
  • Medical payments coverage. It covers costs associated with the injuries, if you, your passengers or family members who are driving the insured vehicle are injured in an accident. Covered costs may include hospital visits, surgery, X-rays and more.
  • Personal injury protection (PIP). It covers medical expenses after an accident or other expenses incurred because of your injuries, for example child care expenses or lost income.
  • Other types of car insurance coverage.

Factors that affect car insurance rates

The prices of cars insurance applied by insurance companies are different for every driver. If you are viewed as a high-risk driver by an insurer, they will charge a higher premium because they think you will be more likely to have an accident and make a claim. The amount you have to pay for a car insurance depends on different factors which are used to determine how much of a risk you will be. The main factors are:

  • The car you drive. The price of your car, the engine size and any performance related modifications can increase your premiums.
  • Personal information. How old are you, where you live and where you keep your car also affects your premiums. If you live in a high crime area and park on the road you will pay more than if you live in a quiet, low crime area and keep your car in a locked garage. Also, if you are a young driver, insurers are going to charge you more.
  • Your driving. Your premiums will be much lower, if you are a safe driver with years of no claims behind you. The more experienced you are the less you are likely to pay, but the more you drive, the more you will pay.
  • Your policy. A way to reduce your premium is by choosing a higher excess amount. So, if you agree to pay more if you need to claim you are going to reduce the risk to the insurer as they will need to contribute less.

These are the main factors used to determine the risk, but some insurance companies can consider other factors.

Car insurance documents checklist

When you go to buy a car insurance, you need to provide different documents. The list of the documents depends on your unique situation and on the type of car insurance you are going to buy. Collecting these car insurance documents beforehand, can help you speed up the process and get to the closing table sooner. Here’s what you can expect to need when you go to buy a car insurance:

  • Driver’s license.
  • Vehicle registration form.
  • Current declaration page.
  • Voided check.
  • Proof or residence.
  • Proof of membership.
  • Proof of company car.
  • Bank statement.
  • Other documents.

These could not be the only documents you need to buy a car insurance, so you need to be ready to provide all the documents the insurance company needs.

Choosing a car insurance that is right for you

Choosing the best car insurance is not a simple problem, but it’s vital for your financial health that you make the right choice and don’t get overwhelmed by the options. There are some basic things to consider and analyse before choosing the perfect car insurance for you. Here’s the list of what you need to do before buying a car insurance, so you can choose a vehicle insurance that is right for you:

  • Understand the different types of car insurance coverage.
  • Understand what affects the price of the car insurance.
  • Understand car insurance documents.
  • Make a personal financial plan.
  • Compare different car insurance offers.

Remember, it’s always best to have as much information as possible, before you buy a car insurance.

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