MoneyLife

What Is Car Insurance? (Get Insured in 5 Easy Steps)

By Cameron Walch
What Is Car Insurance?

Car insurance eliminates some of the financial risk involved with driving a vehicle around. Buying a car is expensive and so is fixing a damaged one – especially if you have to pay to fix another car. Can you imagine causing a four-car accident and having to pay to get all four cars repaired? When you have car insurance, you can safely drive knowing you have financial coverage. 

So, what is car insurance? Let’s take a closer look at how car insurance works and how get set it up. 

How does car insurance work?

Car insurance is a way to mitigate risk. There are insurance companies all over the world, and you may have seen one of their many commercials. Insurance companies are the ones you will make monthly or yearly payments to just in case you get into car troubles. If you do run into problems, then your insurance company will help you financially with the car repairs.

Cars are expensive as is. That also means that they are going to be expensive to repair if they become damaged. You will have to pay a certain car insurance deductible if your car does end up needing work done.

What are the different types of car insurance?

There are many different types of car insurance, but the three main types of car insurance are liability coverage, collision, and comprehensive insurance. 

Liability coverage will assist you by paying for the costs of the other drivers’ property and medical injuries in the event that you are the one who caused the accident. Your provider will pay up to your covered limit. Each state has different laws about the minimum value of liability coverage that you can have for your vehicle. 

Collision insurance covers the costs of your own vehicle if you are ever in an accident with another vehicle. On the other hand, comprehensive insurance will cover a lot more than collision insurance and liability coverage. Comprehensive insurance also covers damage to your vehicle that is caused by fire, snow, hail, floods, falling objects, car break-ins, or vandalism. Comprehensive insurance also kicks in if your car is stolen. 

How much coverage is enough?

Each state has its own requirements regarding the minimum amount of insurance that you must have for your car. You do have some say in your insurance coverage, but it depends on what you are willing to risk. You can get into some financially stressful moments if you only pay for the minimum amount of insurance. Are you able to pay a larger premium for more insurance?

What is not covered by car insurance?

Normal wear and tear on a vehicle is not covered by your everyday car insurance. Making improvements like, getting new tires after yours lose their tread, will be your responsibility. You’ll also need to pay for any intentional damage.

How can I make my car insurance cheaper?

Always look for a bundle deal. Bundling will save you money because you’ll pay less by combining multiple policies from the same insurance company. The insurance company will reward you with a smaller monthly premium. 

Having a good credit score will help your premium stay low. People who effectively manage their credit scores have fewer claims, which is something insurance agencies love. 

At what age does car insurance go down?

The age of 25 is a great year for drivers. You can start to rent cars at lower rates, and your insurance costs will go down. Statistics show that male drivers are riskier than women, so their insurance costs often remain at higher rates for longer. 

Setting up car insurance in 5 steps

You will always need insurance whether you are a new driver or just purchased a new vehicle. Here are five steps to help you get all set up to properly care for you, your vehicle, and your bank account.

Step 1: Collect information

Coverage varies from one car to the next. In order to determine how much you owe, the company or agency that you work with is going to collect all of your relevant information. You’ll need to provide the vehicle VIN number, year, make, and model, as well as your driver’s license and any other documents the company requests. 

Step 2: Insurance agencies

There are third-party companies that can help guide you in finding the right insurance company for you. You can either choose to speak with an insurance company directly or seek insight from a third-party business instead.

Step 3: State requirements

Each state in the United States of America will have their own minimum requirements for auto insurance. You can always get more than the minimum amount required. Find out how much insurance you want on your vehicle.

Step 4: Shop around

Competition will always come with a profitable business. There will be multiple car insurance companies fighting for your business and your money, so be intentional about which business you choose. 

Step 5: Commit

Once you find the one that you want, reach out to the insurance company to further discuss their plans. The fee you agree to is what you will be paying on a regular basis, unless you end up cancelling and choosing a different provider. 

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Unfortunately, we all have to pay for car insurance as it is required by law. There are a lot of details that go into finding the best policy and insurance company for your needs. Everyone can find the best and most affordable policy for them. It just requires patience, effort, and resilience! 

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