All about Cars

What is auto insurance? Auto insurance (or car insurance, motor insurance) is insurance consumers can purchase for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred. By buying auto insurance, depending on the type of coverage purchased, the consumer may be protected against:



* The cost of repairing the vehicle following an accident
* The cost of purchasing a new vehicle if it is stolen or damaged beyond economic repair
* Legal liability claims against the driver or owner of the vehicle following the vehicle causing damage or injury to a third party.

Liability insurance covers only the last point, while comprehensive insurance covers all three. Even comprehensive insurance, however, doesn't fully cover the risk associated with buying a new car. Due to the sharp decline in value immediately following purchase, there is generally a period in which the remaining car payments exceed the compensation the insurer will pay for a "totaled" (destroyed, or written-off) vehicle. So-called GAP insurance was established in the early 1980's to provide protection to consumers based upon buying and market trends. The escalating price of cars, extended term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a "gap" exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In some countries including New Zealand and Australia, market structures mean that people are more likely to buy a nearly new car than a new car so this is less of a problem.

In the United States, liability insurance covers claims against the policyholder and generally, any other operator of the insured's vehicle, provided they do not live at the same address as the policyholder and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary for example when a family member comes of driving age they must be added on to the policy. Liability insurance generally does not protect the policyholder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party's policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle.

Generally, liability coverage does extend when you rent a car. However, in most cases, only liability applies. Any additional coverage, such as comprehensive policies, i.e. "full coverage" may not apply. Full coverage premiums are based on, among other factors, the value of the insured's vehicle. This coverage may not apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured's vehicle, assuming that a rental car may be worth more than the insured's vehicle. Some states, such as Minnesota, may require that it extend to rental cars. Most rental car companies offer insurance to cover damage to the rental vehicle. In some regions, the costs associated with not having access to the vehicle ("Loss of Use") is also covered. 

Nowadays, auto insurance is really expensive. A typical insurance policy can cost a few hundred dollars to a few thousand dollars a year. And the insurance rates you pay are hugely dependent on the insurance company or agent, your age, your car type, your driving record, and even the area you reside in!



You should never go without auto insurance though, despite the costs. Almost all the states require you to protect yourself with a minimum amount of liability coverage. Naturally, the bare minimum is not adequate enough for the average car owner. And as you add in additional coverage for your car, you realize that you will be paying a fairly large sum annually.

So, understanding auto insurance can actually help you to decide on a suitable insurance policy that won't vacuum clean your wallet! Here, we have gathered 10 of the best tips for lowering your auto insurance, by as much as 40

Always compare insurance policies. There are states which regulate auto insurance rates, but the insurance premiums can vary by hundreds of dollars for the exact same coverage. It is definitely worthwhile to shop around. The first thing you can do is to check with your state insurance department. They often provide information about the coverage you need, as well as sample rates from the biggest companies. You can also ask your friends or look up the yellow pages. Checking consumer guides and asking insurance agents can pay off as well. You can easily find out the price range for your insurance policy, as well as discover the lowest prices in town.

However, you should not be shopping based on price alone. The insurance company should provide good service at the best price. Excellent personal service is available as well, and they provide added conveniences, although they cost a fair bit more. Ask the company how you can lower your costs, and also check their financial ratings. The rule of thumb is always to get three price quotes from three different companies, and pick the one with the best value.

It can also be a good idea to increase your deductibles. When you file a claim, the deductible is the amount you pay before the insurance company pays for the rest of the damage. A higher deductible on collision and comprehensive coverage can lead to a much lower premium. For example, increasing your deductible from $200 to $400 can reduce your premiums by up to 25àHowever, you must ensure that you have the financial resources to handle the largest deductible when the time comes.

Remove certain types of coverage from your policy. Almost all the states require liability coverage for your car, but the rest of the coverage is probably dispensable. However, you do not want to be underinsured if you're in an accident, so it isn't advisable to remove all of your additional coverage. Optional coverage includes medical payments, uninsured motorist, collision, and comprehensive coverage.

Drop collision and comprehensive coverage for older cars. If you drive an older car that's worth less than $2,000, it's probably more cost-effective to drop collision and comprehensive coverage since you'll probably pay more for the coverage than you'll collect for a claim. You can find out the worth of your car by asking auto dealers and banks.

Make sure your credit report looks good. Car insurance companies often look at your credit history as there is a correlation between the risk to the company and your credit history. If you pay your bills on time and maintain a good credit history, you can enjoy lower insurance rates.

Drive less. Insurance companies often offer low-mileage discounts to motorists who drive less than a predetermined number of miles each year. You can use public transportation more often, car-pool with friends, and take the train or a plane instead of driving to another state. And you'll save on more than your coverage as you'll need to spend less on gasoline (of which prices are incredibly high).

Maintain a clean driving record. The company will give you a price break and you can save on your insurance policy after a specified period of a clean driving record. This means that you have no accidents, no serious driving violations etc, during this period of time. The simplest and surefire way to qualify for this discount is to drive carefully and defensively all the time.

Choose a low-profile car. Insurance rates vary among different models of vehicles. Generally, sports cars and high-performance cars tend to cost more to insure, mainly because they represent more risk of theft and the drivers are often the people who drive more recklessly. Newer cars will cost more to repair or replace than older ones, so naturally, they can more to insure. Low-risk vehicles include station wagons and sedans.

Ask about safety and security discounts. The insurance companies sometimes offer discounts on your insurance if your car is equipped with the following: anti-lock brakes, air bags, automatic seat belts, car alarms, tracking systems. These reduce the injury risk to you, as well as the chances of your car being vandalized or stolen.

Finally, ask about other discounts. You may receive a discount if you buy more than one type of insurance from the same company or if you insure multiple cars under the same policy or company. You may also receive discounts for taking a defensive driving course, staying with the same company for a few years, being a driver over 50, good-student discounts, and being an AAA member. If you already have adequate health insurance, you can also eliminate paying for duplicate medical coverage, thus lowering your personal injury protection costs by a substantial amount.