Car insurance has become a law in most states in the United States of America, where people must get their car insured for several reasons. One such reason is that it provides financial safety to people if an accident occurs that causes huge repairing to the vehicle. As a result, the car insurance company will cover the cost of the damage incurred by the vehicle.
There are instances where a person finds their car stolen. This is pretty common nowadays with tools that can unlock the car effectively. In such times, a person wishes to have their vehicle insured to cover the cost of theft. At times, a person is at fault and causes an accident that damages the car and causes severe bodily injuries or property damage. If someone were to accumulate the cost to cover all these expenses, it would be too much for a single person to bear.
An individual can meet the minimum requirement that the law asks from each driver responsible for driving a vehicle with car insurance. Car insurance coverage comes in different packages, so it entirely depends on the policyholder to choose the insurance that fits their needs.
This article will cover the basics of car insurance. Moreover, we will discuss the various kinds of car insurance coverage that insurance companies offer to prospective policyholders. The guide will cover the factors that people should look into to get the best price on their car insurance. We will also discuss the best car insurance companies in the industry. A FAQs section will be added to answer some general questions related to car insurance.
Let us look at the fundamentals of car insurance.
What is Car Insurance?
Car insurance is a type of financial protection that safeguards the individual by covering the cost of the car if it is damaged due to a non-collision event or when it gets stolen by someone. In the case of a collision, the insurance company will cover the medical bills and the car repair, but the coverage varies from one insurance provider to another.
A car insurance policyholder will have to pay a premium for the insurance, the amount of money needed to keep the policy active. If premiums are not paid on time every month, then there is a high probability that the policy will lapse. If that happens, the policyholder cannot drive legally as per the law and would need to pay higher coverage. In return for this premium, the company will cover the cost of all expenses under specified insurance.
Each insurance policy has limitations beyond which it does not provide coverage. This coverage signifies the maximum claim an insurance company would pay for the damage inflicted to the car and on the policyholder. When a person approaches a car insurance company, they look at the different packages, also called insurance coverage, the company is offering. The person would choose a package that fits their wants and needs, and so the company will provide aid to them based on that package only.
Car insurance prevents a person from paying another individual for injuries and repairs due to an accidental collision between the vehicles. A policyholder will need to submit a claim to the car insurance company to activate car insurance. After the company receives the claim, they will evaluate the damage and pay the specific authorities up to the policy limits of the policyholder.
Let us look at how car insurance work.
How Does Car Insurance Work?
A car insurance policy is an agreement that the policyholder makes with the insurance company. In this agreement, the policyholder must pay the premiums consistently to ensure the company will cover the cost of the damage. The damage can be segregated into injuries cost, vehicle repair, and property damage.
When purchasing car insurance, the prospective policyholders have to select coverage limits that correspond to the financial protection as per the insurance policy. Policyholders have a choice where they are allowed by the policy provider to increase the coverage limit on their policy. This would also increase the insurance premium that the policyholder would have to pay every month.
Several factors go into play to determine the claim process. Generally, when a person files for a claim, it is usually to avoid paying the cost of damage or repair. People sometimes get a new car because their insurance coverage can cover the amount. However, the insurance company would inspect the car and the accident site to understand the source of damage and the responsible people for the accident.
After the claim is filed and approved, the insurance company can pay the amount to the policyholder, a mechanic to make the repairs, or the affected party who was part of the collision. People get a car on lease from a bank, creditor, or leaseholder. So the claim amount can be paid to these individuals as well.
Let us see how a car insurance claim work.
How Do Car Insurance Claims Work?
Whenever an incident happens, like a car getting stolen or accident results, a person’s first few things involve claiming to cover the cost of injuries, property damage, and even medical bills. As a result of an insurance claim, the insurance companies are entitled to verify the incident before proceeding further. When a claim is verified, the insurer will handle the relevant costs.
Different companies have various methods through which a policyholder can file a claim. While some companies allow their drivers to carry out the claims through their online platform or insurer app, other insurers would like an in-person claim to be filed.
After a claim has been initiated, the insurance provider is entitled to ask the policyholder for some particular details, which may include the following:
- Contact information of another driver (s) and the witnesses at the scene of the incident
- License plate number(s) and the description of the car(s) involved, like model and colour
- Proof of the incident through photos, videos, and written description
- Name(s) and badge number(s) of the law enforcement officers that reported at the scene
The policyholder will be required to work with an insurance adjuster during the claim process as it is vital to understand how the incident came about. The insurance adjuster evaluates the scene through the pictures and written statements of the policyholder and the law enforcement officers. The adjuster’s role is to understand who is responsible for the incident and how much claim needs to be paid to the other party.
If the insurance adjuster finds the claim valid, the policyholder will receive a payment to cover the cost of damage and medical bills.
Let us discuss the different types of car insurance coverage.
What Are the Kinds of Car Insurance Coverage?
This section will cover the different types of car insurance coverage that people can apply for from car insurance companies. Let’s get started!
Under liability insurance, the person who is found legally at fault is entitled to cover the costs incurred due to the accident. These costs are divided into two broad categories that generally appear under this type of insurance. They include the following:
- Bodily Injuries
As a result of the accident, the guilty individual has to pay for all the expenses incurred to the person’s body in terms of injuries. In the case of death due to an accident, the policyholder will have to pay for the funeral costs. If multiple people were harmed during this incident, the policyholder would cover all their medical bills. Some of those people can include the driver, the passenger, other drivers, or even a pedestrian.
- Property Damage
Due to the accident, the person at fault will need to pay for all the repairs needed at the other person’s property. These repairs will include fencing, part of the damaged home due to the accident, etc. The policyholder will not need to cover those parts of the property that were not caused by accident.
Uninsured Motorist Coverage
Under uninsured motorist coverage, the policyholder receives financial protection given that the other person responsible for causing the accident does not have car insurance. This kind of insurance is not specific to any state or city and is always active. So people who are victims of a hit and run can file a claim to cover medical costs. Uninsured motorist coverage also covers the costs of property damage.
Nowadays, states require all drivers to have a minimal amount of uninsured motorist coverage to protect them if they get injured in an accident caused by the other person. Apart from uninsured motorist coverage, policyholders also apply for underinsured motorist coverage. It covers the rest of the cost, which is beyond the scope of the policy limit and the expenses incurred.
Personal Injury Protection (PIP)
As the name suggests, the insurance will provide financial coverage to the policyholder and the passengers and cover all their medical bills. Since this insurance is labelled as “no-fault coverage,” it does not discriminate between who was at fault that caused the accident. This insurance can be activated for a claim when riding a bike and getting into a collision with a car.
There are instances where the policyholder can use personal injury protection to reimburse them for the salary and paid tasks they cannot perform due to their injuries. This insurance is very state-specific, so people in particular states can only opt for it. Some states that allow Personal Injury Protection insurance include New York, and Texas, where drivers are encouraged to carry this insurance.
Medical Payments Coverage (MedPay)
Medical Payments Coverage insurance works similarly to Personal Injury Protection insurance. It covers the costs of the medical bills for the policyholder and the passengers that were part of the accident. So all the injuries incurred during the car accident will be covered under MedPay. However, there is one main difference between the two insurance coverage. Under MedPay, the policyholder will not receive any money to cover expenses like lost wages.
Certain states require drivers to have MedPay insurance. These states include Wisconsin and Maine. In the other states, it is entirely optional for the drivers to get MedPay. They can get it through their standard car insurance policy. But not all the states cater to this car insurance policy.
As the name suggests, the Collision Coverage insurance will provide financial protection by covering the costs of all the damages incurred due to an accident. Under this insurance, the policyholder’s car will undergo repair that the insurance company will care for. This insurance does not differentiate who is at fault; it only makes amends to the car even if it hit a tree, an object, or got damaged due to potholes.
Under comprehensive coverage, the insurance company will cover all the costs, such as repairing the car caused by an event. However, the event shall not have anything to do with a car accident or collisions with another object.
This insurance is designed for those circumstances that are not mainstream reasons to get car insurance. These may include hail damage, damage from falling objects, and damage from an animal like deer, bull, buffalo, or cow. Comprehensive coverage provides insurance coverage due to vandalism or when a car gets stolen. All these reasons are quite random and unexpected.
Let us see the steps a person should follow to locate the best price on car insurance.
How Can a Person Find the Best Price on Car Insurance?
This section will look at how people can start shopping for an insurance policy. Different insurance companies have various rates for the same coverage. Financial experts advise people to ask for car insurance quotes from various car insurance companies and compare them to find the perfect fit.
The following factors will help navigate prospective policyholders to find the best price on car insurance:
The first thing anyone looking for car insurance should shop around the car insurance industry to check if the rates a person has received are high or low. Getting multiple quotes from different insurance providers will help a person find the most affordable car insurance company. For some companies, it is straightforward to find free quotes. Such companies have websites and apps that people can use to get free quotes.
However, some insurance companies do not have much information on their website, so an individual would need to work with a car insurance agent to get the quotes. These agents can help people get quotes from different car insurance companies, thus making it easier for people to make the comparison. It is crucial to understand that insurance quotes are completely free.
Ask About Discounts
Financial experts advise prospective car insurance policyholders to ask about discounts when inquiring about online quotes or car insurance agents. These car insurance discounts will substantially decrease the car insurance cost an individual would need to pay.
There are several kinds of car insurance discounts which include the following
- Qualifying for a good driver discount
- By insuring multiple vehicles with the same car insurance company
- Qualifying for a good student policy discount
- Paying the car insurance bill in advance for the whole year rather than every month
- People who are aged 55 or above that go to take a defensive driving class
Choose a Higher Deductible
Some car insurance policies have a deductible which includes collision and comprehensive coverage. The deductible is the amount that a car insurance company is entitled to deduct from an insurance claim check. It is beneficial for the policyholder to select a higher deductible as that would decrease the amount a policyholder will have to pay for the car insurance.
Let’s consider the following example: A person met an accident and their car suffered damage of $3000. If the collision deductible offered by the car insurer at the time policy was bought was $1000, then the policyholder will get $2000 to cover the repairs. The reason is that the insurer will deduct the collision deductible from the overall damage cost.
Hence, if a person decides on a high deductible, then it is essential that the person set-asides that set amount so that it is there to make deductions at the time of settlement and the person can file a claim.
Check-In About Pay-Per-Mile Policy
It is recommended that individuals seeking a car insurance policy inquire about the pay per mile scheme from the insurer. This scheme is designed for people who do not travel much on their vehicle that the company insures. Hence, if you own a car but take public transport to work or the office, talking to the insurer about the pay per mile scheme is crucial.
Under the pay per mile scheme, the individuals will have to pay a monthly base rate and a per-mile rate. These are a relatively cost-effective option to go with, particularly when a person does not drive much. As a result, this will save them some precious dollars on car insurance.
Consider the following example: The pay per mile base rate is $50 per month, with an 8 cent per mile rate. If a person drives 800 miles a month, their monthly bill will be $114 (50 plus 800 times 0.08).
Let us look at the best car insurance companies in the industry.
Best Car Insurance Companies
This section will discuss some of the best car insurance companies in the industry. These companies are well-reputed, and their reviews are outstanding as per their clients. Let’s have a look at them!
Amica Mutual holds the best rating of ‘A+.’ It offers the best car Insurance Package called Platinum Choice Auto, through which you earn Advantage points. Advantage points are designed explicitly for policyholders to win rewards for their excellent driving skills, renewing their policies, and adding more people to this Amica Mutual policy. It also provides you with multiple opportunities and offers for reducing and eliminating your deductibles.
The Platinum Choice of Amica offers unique things like credit monitoring and a replacement for a new car if the car has completed 15,000 miles. You have used it for at least one year and a rental coverage of $5,000. On the other hand, some standard coverage options enhance your policy, such as repairing the glass without a deductible and coverage of gap.
Other than Platinum and standard coverage, Amica offers its basic coverage that includes options like property damage, uninsured or underinsured motorists, protection for personal injury, and liability for physical injury. Amica’s policy also includes coverages for rent issues, roadside assistance, protection for lease gaps, or loans for autos.
Advantages of Amica Mutual:
- It offers airbag replacement without a cost after its deployment.
- If you lose the keys, it’ll replace the lock.
- Amica will provide $ 1ooo for bail bonds if you have to appear in court.
Disadvantages of Amica Mutual:
- It lacks the rideshare insurance
- Its insurance features are limited to some areas and are not nationwide.
- Hawaii is out of its coverage areas.
The Progressive auto Insurance company also holds the best rating of ‘A+.’ It is the best choice for policyholders managing their budgets. With the ‘Name Your Price’ tool of Progressive, policyholders can customize their premiums by deciding available pricing according to their budget. It asks for your essential information, like the model of your vehicle and your address. Then you have to mention how much you can spend on this policy. Progressive will present a lot of policy options that suit your budget.
Progressive offers multiple discount options that depend on your purchasing method and residence. The discount options are the availability of combining auto insurance policy with home or life insurance, insurance of multiple autos, availability of anti-theft alarms, paperless payments, and discounts for students with good grades.
If you bought and consistently maintained your Progressive insurance policy online, you can have loyalty rewards. Progressive has a Snapshot program, which decreases your rates based on your driving skills, frequency, and habits.
Progressive provides coverage options like medical expenses, liability, comprehensive, and coverage for the uninsured or underinsured motorist. Other coverage options include custom parts, rideshare, rental car adjustments, gap coverage, and roadside assistance.
Advantages of Progressive:
- Its Snapshot program offers your preferred car insurance rates.
- You can choose your premium plan under the tool ‘Name Your Price.’
- You can compare quotes with its ‘comparison’ tool.
- The Loyalty Reward program offers rewards based on the frequency of your policy.
Disadvantages of Progressive:
- Progressive demands different pricing depending on your way of purchasing, such as online or via phone call with an insurance agent.
- Its multiple discounts depend on the policy options and are available for all state residents.
State Farm is the best auto insurance policy for young drivers. It holds the best ratings of ‘A+,’ providing teenage students with more than 25% savings with at least a 3.0 GPA.
With State Farm, teenagers, including students with good grades, away from home, taking driving training, and those who want to make savings can have multiple discounts with the ‘Sheer Clear, safe driving discount’ program of State Farm.
The travel coverage options of State Farm include payment for transportation and meals. Suppose your vehicle has been damaged in an accident more than 50 miles away from your home. In that case, you can have travel coverage under your comprehension or collision insurance. State Farm company will also pick up your damaged or dislodged vehicle from the accident.
Alongside travel coverage, other options offered by State Farm are uninsured or underinsured motorists, roadside assistance, medical payments, and liability offer. The coverage option of rideshare is only available if you use your car as an Uber or Lyft.
State Farm offers its insurance policy online and in-person through agents. It has an extensive network of about 19,000 agents that provide efficient in-person assistance. Its Mobile application helps make requests for paying bills, road assistance, and claiming files from any area under the policy’s coverage.
Advantages of State Farm:
- Its’s ‘Rideshare’ coverage option is available in many states.
- You can save your money through Its programs like ‘Drive Safe & Save’ and ‘Steer Clear.’
- State Farm offers a ‘Travel expenses’ coverage covering your meal and transportation expenses.
Disadvantages of State Farm:
- State Farm’s Drive Safe & Save program is not reached in CA, MR, or RI.
Farmers auto insurance company is well-known for providing different categories of discounts. These categories include discounts for members with active duty service, military members discharged with honour, essential duty workers, and veterans. Not all discounts and their categories are alike; they are dependent on your policy and living state. So, you can save more money by combining both insurance policies of home and car insurance. Farmers are considered the first major insurance company to offer a discount for alternative vehicles run on fuel.
Although Farmers’ insurance policy has average ratings of ‘A-, ‘it provides multiple ways to save more on car insurance premium plans. With these ways, you can reduce the burden of high rates of Farmers’ policy. Its standard coverage options are property damage, uninsured or underinsured motorists, payments for medical, protection from personal injury, and liability.
Other than standard coverage, Farmers also has some additional coverage options. They are adjustment of rents, availability of roadside assistance, and rideshare. Farmers provide their insurance policy for spare parts of the cars, so it’s a good option for people having classic vehicles to get the Farmers coverage of more than 750 USD on the spare parts of their antique cars.
Advantages of Farmers:
- If your car is totalled, Farmers insurance policy provides ‘Guaranteed Value’ coverage such as an ‘agreed value’ for your car fixation.
- Farmers offer a large number of discounts and discount categories.
Disadvantages of Farmers:
- Discount categories and their percentage are not available for all, and they will depend on your policy and residence.
- Farmers’ insurance company does not offer the cost for a new car to replace a totalled car.
Nationwide is a well-known auto insurance company that offers an annual opportunity for policyholders to alter the existing policy with the ‘On Your Side Review’ option meaning that drivers can review their policy, apply for available discounts, make changes to their policies according to their needs and ask questions about their queries.
Another unique feature of Nationwide is accessing two discount programs; SmartRide and SmartMiles. The SmartRide discount program is for good drivers according to their usage and driving skills. On the other hand, SmartMiles is a discount for low mileage drivers to provide them with low pricing rates.
Nationwide’s standard coverage options are gap insurance, liability for physical injuries, uninsured motorists, availability of roadside assistance, and policies like spare parts insurance for owners of classic cars and young drivers.
In comparison, Nationwide provides fewer discount offers than other auto insurance companies. But with some valuable solutions, you can reduce your monthly premiums. The fixes include combining two or more policies, driving safely and for fewer miles to avoid the risk of accident, and making direct payments on time.
Advantages of Nationwide:
- You’ll be paid according to the miles you drive.
- It offers discounts through the safe driving application ‘SmartRide.’
- Allstate offers a cash bonus of up to 500 dollars on purchasing a new vehicle or a car.
Disadvantages of Nationwide:
- The discounts such as SmartRide and SmartMiles are dependent on the coverage you select and the state you’re living in.
- The coverage option of ‘Accident forgiveness’ is not for all states.
Allstate is popular among auto insurance companies due to its helpful usage-based insurance programs. It has unique features like ‘Milewise’ that offers safe driving for short miles or distances and does not need more rides than Drivewise, which was for long distances, more drives, and discounts every 6 months.
Allstate has a rating of ‘A+’ and overall good customer support. They give quick responses to questionnaires asked by people. They have good customer responses on social media platforms such as Twitter.
Allstate insurance policy has comprehensive coverage options like payments for liability and medical, availability of roadside assistance, adjusting rental issues, and uninsured motorists. Due to the unavailability of Drivewise and Milewise in all states, the customer ratings of NAIC are high.
Advantages of Allstate:
- You can have discounts and driving insights by driving safely under the ‘Drivewise’ feature of Allstate.
- If you avoid accidents and drive safely, you’ll have a bonus every 6 months.
- It offers discounts for Teen drivers and on the purchase of new cars.
Disadvantages of Allstate:
- It does not provide its Drivewise offer in all states under its coverage.
- Its premium plans and policy is dependent on your purchasing method, whether you contact a local agent or buy with its online application.
USAA car insurance company is the best for military members, veterans, and close family members. Compared to other insurance companies, USAA has high ratings for NAIC customer complaints, delay policies, many issues regarding claims, and unsatisfactory solutions for their handling.
USAA offers coverage options such as accident forgiveness, adjusting rental issues, protection for rideshare gap and labour, liability, and assistance coverage for the replacement of cars. A great benefit active military members can have is a vehicle storage discount of more than 60%.
Advantages of USAA:
- It has the top rating among other auto insurance companies for customer satisfaction.
- It has a below-average rating of NAIC customer complaints.
- Its offers and discounts are available for all 50 states.
Disadvantages of USAA:
- It is best for military members but not available for civilians.
- Its coverage does not include any unique options.
Frequently Asked Questions about Car Insurance
Now that you have understood car insurance let us look at some questions people usually ask.
What is the best car insurance?
Many valuable car insurance companies include Amica Mutual, Progressive, State Farm, and Farmers. Other than these, you can also choose nationwide, Allstate and USAA. All car insurance companies offer different coverage options that vary according to policy and your residence state.
Does state matter in choosing auto insurance?
Yes, the state matters a lot in car insurance because insurance companies allow their policy coverage options based on ease and availability. So it’s good to check about coverage options available in your state by the selected company before choosing car insurance.
Can you get a discount with auto insurance?
Yes, you can get various discounts offered by the company you choose. These include a discount for policyholders with combined insurance of home and car. Other discounts are affiliation discounts, fuel or electric vehicle discounts, safe driving discounts, and discounts for students and teenagers.
How to reduce car insurance premiums?
To reduce car insurance premiums, follow the following step:
- Combine two or more insurance policies like home and car insurance policies.
- You can increase your deductibles to lower your car insurance premiums. A deductible means the amount you pay for a claim by yourself without the aid of your insurance company. By increasing deductibles, you can have affordable rates for your insurance premiums.
- Review your selected car insurance policy in a time so that you can make changes to it according to your affordability and need.
- Lower your insurance premiums by applying for more discounts. All auto insurance companies offer discounts to safe drivers depending on your state and selected policy coverage. Drive safe and clear your driving records so that Discounts can lower your insurance premiums.
- Purchase usage-based insurance policies so that your driving record can decide your premiums.
From where can I buy car insurance?
You can buy car insurance from a local insurance agent or company or contact an independent broker that will provide your insurance policies from different companies.
Does the vehicle affect the car insurance rates?
Yes, car insurance rates play a significant role in the making and model of your car. The price of your car has a significant impact on your insurance policy rates; the more your costs, the more you have to pay for insurance.
Can I purchase car insurance without having my car?
Yes, people who don’t have a car or cars and use vehicles of others can purchase insurance with a non-owner policy. It enables them to have coverage like uninsured motorists and liability coverage to keep them safe from accidents.
What is the result of providing wrong information about driving history?
If you lie about your driving history, the company will charge you high rates and deny providing coverage after finding the truth about your representation. Providing wrong information to your insurance company is legally a fraud. You can be fined and provide no community service, or even you can face trials and eventually a prison sentence.
The article covers various segments of car insurance and is designed to cover most aspects of a car insurance policy, particularly for beginners who do not have enough information. This article will provide them with the needed knowledge to understand car insurance. The first few sections highlight the basics of car insurance and its working mechanism. People can also read about the steps they need to follow to file a claim to their insurer.
The article has covered car insurance policies that people can opt for depending on their wants and needs. Each car insurance policy shows its importance to be bought for the safety of the policyholders and others on the road and in the car. The last section covers the best car insurance companies that people can apply to. However, it is recommended that they ask for free quotes from multiple companies and compare them before deciding to go with a specific one. To help beginners, the article discusses the factors that prospective policyholders should look into before making any decision.