Shopping for car insurance is tough. With so many options available and so much gobbledygook and legalese to sift through, as well as insurance laws different across all 50 states, AutoInsuranceMonitor.com is providing drivers a broad collection of FAQs to help them cut through the confusion and get the best quote possible.
Q: What does a car insurance policy look like?
A: At its heart, an insurance policy is a contract between the insurance company and a driver and is part legal language typically seen in a contract and the type of car coverage that was purchased.
The legal language includes the following:
- A Declaration Page – Part of the agreement describing the who and the what of the insurance policy. It shows what car is covered, the car’s VIN, what family members are covered, the address where the car will be parked, the policy number, expiration date and what type of car coverage was purchased.
- Insuring Agreement – Spells out what a driver is covered for. Also explains the dollar limits of the policy and the coverage options purchased like collision or Uninsured Motorist Coverage.
- Exclusions – What’s not covered is spelled out here. For example, accidents resulting from racing are typically not covered.
- Conditions – Part of the policy outlining responsibilities and coverage limits on what insurer will cover. For example, spelling out how to report a car accident.
- Definitions – Also called the “fine print”, this portion of the insurance agreement defines unambiguous terms and is a mandatory reading in order to comprehend the agreement.
Q: Do I need Collision Insurance?
A: Unlike liability, this is optional under most circumstances and protects drivers if their car is damaged in an accident. This is coverage that is called cash-value and only pays out the car’s worth. Collision Coverage is not optional when a car is financed.
Q: What’s a deductible?
A: This is the money spelled out in an insurance policy that states how much a driver pays when an accident occurs. Going with a higher insurance deductible often translates into a lower premium cost, while a lower insurance deductible will lead to higher monthly payments.
Q: Is my credit history used to determine my car insurance premium?
A: Yes. Fair or not, insurance companies use credit history to determine insurance premiums. While some companies only look at someone’s credit score others may just look at the last 12 months. While some check the last five years. Additionally, drivers with good to excellent credit are more likely to get the best rates.
Q: What is Comprehensive Insurance coverage?
A: Similar to collision coverage in that it isn’t state-mandated but bank-mandated when a vehicle is financed. Comprehensive insurance covers a driver when a car is ruined in a natural disaster such as a hurricane, stolen or vandalized; this is also cash-value coverage.
Q: Should I insure my car and home with the same company?
A: Yes. Having a car and home insurance policy with the same insurer is an easy way to start saving on monthly premiums. The same applies to having multiple cars under one policy.
Q: What does Personal Injury Protection cover?
A: Commonly referred to as PIP, Personal Injury Protection is optional coverage that typically covers things such as lost wages, hospital bills and even child care costs and covers a motorist if they were at fault or not; Sometimes covers passengers also.
Q: What is Medical Payments coverage?
A: Optional coverage that takes care of medical and funeral bills for covered drivers in a car accident and is available in most of the 50 states.
Q: Is Uninsured Motorist Coverage the same as Underinsured Motorist Coverage?
A: No. While both are optional coverage, Uninsured Motorist Coverage protects drivers if they have a car accident with an uninsured driver or if they are the victims of a hit and run accident. Depending on the state, it may also cover property damage. Underinsured Motorist Coverage protects drivers when they are injured in a traffic accident with driver having inadequate liability coverage.
Q: If my car is damaged and I need a rental is the rental covered under my policy?
A: Rentals are covered if the optional Rental Reimbursement coverage is part of the policy.
Q: What is Emergency Road Service?
A: This is optional coverage that picks up the tab if your car needs to be towed because of mechanical failure.
Q: Does the type of car I drive affect my monthly insurance premium?
A: Yes. Sports cars and expensive-to-repair vehicles will cost more to insure than sedate sedans and soccer-mom minivans.
Q: Is insurance coverage available for classic cars?
A: Yes. Commonly referred to as antique or collector car insurance, these insurance policies are similar to insurance policies for newer cars with a few major differences. For example, premiums are lower and full coverage policies cheaper. Also, if a car is stolen, these policies pay for the car’s agreed value.
Q: How does my driving record affect my car insurance rates?
A: A lot! Lots of traffic tickets are a sure way of guaranteeing higher insurance rates. Additionally, most insurance companies have a Good Driver Discount for those drivers with unblemished driving records. It’s also important to note that if there are several drivers on an insurance policy means that all their driving records will be compiled so if there is a bad apple in the bunch everyone will be paying for it.
Q: What is liability Insurance?
A: Also known as liability coverage, liability is the foundation of all car insurance policies and is mostly mandatory in all 50 states and protects drivers from claims for injuries or property damage when an accident happens. Coverage limits vary depending on the state. Liability is broken into two parts: bodily injury liability and property damage liability.
- Bodily Injury Liability takes care of hospital bills, any wages lost, and pain and suffering.
- Property Damage Liability pays for property damaged in an accident.