Car insurance is one of those products you only need when something goes wrong, but it quickly becomes essential to help you recover from a serious car accident. Whether you’re trying to insure your very first car or shopping for your dream vehicle, the policy you choose will eventually matter. However, there’s a wide range of options out there when it comes to car insurance, which can make things pretty confusing.
Here are some answers to commonly asked questions to help you choose the right policy for your specific needs.
What determines the cost of car insurance? Why does my premium keep going up?
An increase in your car insurance premium is frustrating, especially if your driving record is pretty good, but the reason is generally related to insurance risk.
Insurance rates are supposedly personalized to each driver based on an extensive range of factors, from your age and relationship status to your accident history. That’s because insurers claim to calculate premiums based on the likelihood you’ll cost the insurer money by filing a higher number of claims. For example, women are statistically less likely to get into accidents, which is why they tend to pay less.
Premiums can go up or down due to factors like:
- How often and how far you drive, which can correlate to your chances of being involved in a crash
- Whether you’ve already had multiple accidents, especially claims where you were at fault due to traffic violations
- Having additional drivers or vehicles covered under your policy
- Driving a very expensive vehicle since it increases the likelihood of theft as well as the cost of necessary repairs
- Whether your car has high-quality safety equipment that can help you avoid an accident
Does my zip code affect the cost of car insurance?
Did you know that your neighborhood’s accident statistics can impact your car insurance premium? Major metropolitan areas are likely to have higher insurance rates simply due to more cars, busier roadways, and car accidents than smaller communities.
Drivers in rural zip codes also have a lower chance of dealing with theft or vandalism. As a result, insurance companies set their rates according to data tied to your zip code, especially accidents and the number of claims for stolen cars. Moving from one zip code to another can significantly affect your premium, even if you’re technically in the same city, because of this focus on hyper-local risk assessment.
Does my job affect the cost of car insurance?
Again, insurers collect and analyze a great deal of information to determine premiums based on predictions generated by the pattern of past claims. The nature of your job is part of this equation and can result in a significant difference in rate, even for two applicants with a similar driving profile.
For example, retirees will often have lower premiums. They’re more experienced drivers and, therefore, less likely to get into an accident, and they drive less because they don’t have a daily commute. Some jobs are considered high-risk by car insurance companies, while others are considered low-risk.
Nurses, teachers, and police officers are on the list of careers that enjoy the benefit of more affordable premiums. On the other hand, a driver that uses their vehicle to work for Uber, Lyft, or another rideshare service will likely see their rates increase. That’s because, from the insurer’s perspective, being on the road often adds more wear and tear to the vehicle and places them at a higher risk of crashing than the typical driver.
How can I reduce the cost of my car insurance?
While some things are beyond your control, good driving habits will have the biggest long-term impact on car insurance rates. Every time you get a ticket for a driving-related violation, it goes on your record for several years and can cause your premiums to creep upwards. Filing claims will raise your premiums, so driving carefully and avoiding mishaps is the best way to avoid expensive insurance costs.
Consider whether you qualify for any of your insurer’s discount programs as a proactive way to lower your monthly expenses. Insurance companies offer reduced rates for everything from customer loyalty to having an extra-safe car or belonging to a certain demographic.
Some of the discounts that may be available include:
- Bundling multiple policies with the same carrier, such as your home, boat, or life insurance
- Paying your policy in full for the year, renewing your policy early, or signing up for preferred payment options like autopay
- Having advanced anti-theft or safety features on your car, like antilock brakes
- Belonging to certain professional organizations with a relationship to your insurer, such as the military
- For younger drivers enrolled in school, demonstrating a high grade-point average
One of the most reliable ways to lower your premium is to pay a higher deductible. While this can significantly lower your monthly costs, higher deductibles will come with drawbacks in the event you need to draw on the policy.
What is a deductible, and how do you choose one?
The deductible is the amount of money that’s deducted from the amount of coverage available.
In other words, it’s what you have to pay out of pocket before your insurance company covers any costs when filing a claim. For example, a policyholder with a $1,000 deductible that files a claim after a car accident would have to pay the first $1000 needed for repairing or replacing their vehicle. The remaining expenses may then be covered by their insurance company, depending on the terms of the policy.
In most cases, drivers can choose a higher deductible amount in exchange for a lower monthly car insurance premium. However, it’s important to select an amount you have complete confidence about being able to pay if you ever need to make a claim.
Ultimately, it’s all about your personal preference between higher out-of-pocket expenses in the event of an accident and lower monthly payments, or vice versa. Choosing a higher car insurance deductible may be smart if you’re less likely to get into an accident, but this isn’t necessarily a safe bet if you often drive on congested roads. Unfortunately, car accident emergencies can happen at any time. It will likely delay any necessary repairs if you can’t afford to cover the deductible.
What is PIP insurance, and what is uninsured motorist protection?
Personal injury protection (PIP), also known as no-fault insurance, provides coverage for your expenses from a car accident, regardless of fault. States with a no-fault insurance system require drivers to carry it, and other states, like Texas, allow it as an optional add-on to liability coverage.
PIP covers medical bills, lost income, funeral costs, and other expenses for the driver and injured passengers. If you’re at fault for an accident or the at-fault driver’s liability insurance doesn’t cover all your damages, your PIP policy can help you avoid a financial catastrophe.
Uninsured or underinsured motorist protection can provide the compensation you could receive from a third party if they don’t have liability insurance or their policy isn’t enough to cover your damages. Unlike PIP coverage, this policy is only available for an accident where someone else caused your injuries or property damage.
What is gap insurance?
Most people know that a new vehicle loses a significant value the moment it leaves the dealer’s lot. This reality can create an insurance risk for owners who financed a car with very little money and their car is totaled or stolen. Traditional insurance coverage will compensate the driver for your car’s current value, which could be less than the amount still owed on it.
Gap insurance is an optional coverage option to cover this difference between the value of the car and the amount you still owe. For example, if you purchased a vehicle for $30,000 and its value is $22,000 after the first year, you might still owe a loan of $25,000. In this case, gap insurance could cover the $3,000 difference.
Do I still need car insurance even if I don’t drive very often?
The short answer is yes. Car insurance is required in every state other than New Hampshire and Virginia. That means driving without insurance will often lead to very serious legal consequences. Depending on the situation, you could be fined, have your license suspended or revoked, or even be sent to jail.
Beyond the legal component, car insurance is essential to help you avoid an overwhelming financial burden if you get into an accident or when your car gets stolen or damaged. For example, if you don’t have liability insurance and cause an accident, you would have to pay for everyone’s expenses out of pocket, which puts you at grave financial risk.
You might consider signing up for a pay-per-mile car insurance policy if you don’t drive very often. Instead of paying a fixed monthly premium, these plans track the miles you drive and bill you accordingly, which can save you a lot of money in the long run. Drivers who want to be adequately protected should purchase the most comprehensive insurance they can afford, depending on their needs.
Is it worthwhile to shop around for car insurance?
Car insurance is an extremely competitive industry, and rates can fluctuate due to many factors. The company that offered you the best package last year might be overcharging you now.
Comparing your options with different insurance carriers is the best way to ensure you get the best deal. It’s a good idea to shop around at least once a year. Of course, it’s important to remember that the cheapest policy isn’t necessarily the best one.
Think carefully about the kind of coverage you need to provide financial security and ensure the quotes you’re getting will reflect that standard. When a really affordable car insurance offer sounds too good to be true, it probably is.
While you can switch providers at any time during the terms of your plan, take steps to compare quotes a few months before the date of your automatic renewal to avoid potential cancellation fees. Renewal will typically happen every six to twelve months. Having a better quote in hand also gives you some leverage to negotiate a better deal with your current provider.
Contact a Lawyer Today for Skilled Legal Services After a Car Accident
If you get into a serious car accident and find yourself dealing with stubborn insurance companies, contact an experienced car accident lawyer who will give you the help you need and protect your best interests.
Since starting his firm in 1999, Stewart J. Guss has had the honor of representing clients from all over the world, helping them recover from even the most catastrophic injuries.
Today, thanks to a strong belief in those values of compassion, respect, and approachability, the firm has grown to employ over 120 legal professionals in numerous offices across 4 states, with nationwide reach.