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Answered: Three Common Auto Insurance Questions

last updated October 17, 2014 by

Insurance is a required purchase, all buyers hope to never have to use. But when an accident happens you will be happy you have it. Getting insurance isn’t the hard part, getting the best rate on the other hand can be a little tougher. Your vehicle, driving record, state of residency and insurance lender are all factors in the rate you will pay for your insurance. Some basic information can go a long ways in insurance shopping. Check out the common insurance questions below to help you get the best rate available the next time you shop for insurance.

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What is a deductible?

A deductible is the amount of money you will have to pay out of pocket following an insurance claim, before your insurance kicks in.

If the deductible is your out-of-pocket cash why not choose the lowest deductible possible? By opting for the lowest deductible you will likely pay a higher monthly premium. Whereas a higher deductible will lower your monthly payment. Think about your budget when picking a deductible. A high deductible can save you money in the short term and is likely the best choice if you have money in savings to cover your deductible if an incident occurs and you need to make a claim. On the other hand, if you can afford it, a low-deductible plan will ensure that you don’t have to come up with a large sum of money to pay for your high deductible if an incident occurs.


Why do city and state of residence make a difference?

Some areas may be prone to more break-in, theft, and fender benders. This causes your insurance to increase in order to covers the increased chance of damage. Some states also require you carry a certain amount of coverage. Checking your states insurance requirements prior to your insurance search will help you understand why you are or are not required to have certain coverage.


How much insurance do you need?

Many factors are important to consider when selecting an insurance plan. The type of car you drive is a big factor. A pricier car with higher repair costs would result in higher coverage to cover all costs if an accident occurs.

Consider the amount of coverage you will need carefully when selecting a plan. If you have an older car it may not be worth it to pay for high coverage, a new car on the other hand would be much more expensive to fix if your insurance didn’t cover the full cost. Also, if you have a new car you are making payments on, most lenders require full coverage.


The different types of insurance:

Collision: covers damage to the car up to the current Blue Book Value.

Liability: pays for the damage you have caused to others if you are found at fault for the accident. Covers bodily injury and property damage.

Uninsured or under-insured: covers your losses if you’re hit by someone with no insurance or not enough insurance to cover all costs.

Comprehensive: pays for damages to your car that are not collision-related. Fire, theft, vandalism, natural disasters, etc.

Personal Injury Protection (PIP): covers the cost of medical expenses and sometimes can cover the lost wages if you are unable to work.