Whether you shop online or use an agent, buying an car indemnity policy is complicated. While the internet makes it bare to compare policies and rates, it ’ s however easy to get confused by all the unfamiliar terms and slang policy companies use. The decision-making process is besides clouded by longstanding misconceptions — or myths — about how policy works.

For example : A draw of people mistakenly believe crimson cars cost more to insure. “ That ’ s not the subject. What drives up rates are things like speeding and accidents, ” said Loretta Worters, frailty president of media relations at the Insurance Information Institute. “ So, if you have a loss car and you speed and get a ticket, or have an accident, those are reasons for a rate increase, not because you drive a red car. ” indemnity companies consider a lot of factors about the fomite when setting their premiums — including the make and model, old age, body type, locomotive size, the price to repair and the likelihood of being stolen — but not the discolor. here are seven things you should know about car indemnity .

1. How prices are determined

Each policy company has its own formula for calculating premium prices, but they all tend to use the like basic factors. These include obvious ones, such as the make and model of the cable car, how you use the vehicle ( for example, do you drive during change hours ? ) and your tug record. other factors that go into the desegregate admit :

  • Your age, gender and marital status: Statistics show young drivers (with less experience behind the wheel) and male drivers are more likely to have an accident. Married drivers, on the other hand, are less likely to file an accident claim.
  • Where you live: Someone who lives in an urban area with a high crime rate is most likely considered a bigger risk than a policyholder in a rural area with less traffic and fewer car thefts and break-ins.
  • Your credit score: In many states, insurance companies can consider credit scores when calculating premiums. The industry says its data shows that drivers with better credit have fewer accidents. Consumer advocates believe this unfairly penalizes lower-income car owners and they want the practice outlawed.

2. The difference between collision and comprehensive coverage

When it comes to car policy, this is credibly the biggest area of confusion. many people, it seems, don ’ thyroxine understand what they ’ re buy. A holocene view by InsuranceQuotes found that 68 percentage of Americans incorrectly believe the comprehensive part of their policy covers price to their car from a collision. According to the Insurance Information Institute :

  • Comprehensive: Provides protection against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, hail, falling rocks or trees, or hitting a deer.
  • Collision: Reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object (such as a tree or guardrail) when you’re at fault. It also covers damage from potholes or from rolling your car.

Both comprehensive examination and collision coverage are optional insurance that protects your car. Liability policy is legally required because it covers the costs associated with injuries, death, or damage caused to another vehicle or property that you or another driver causes while driving your car .

3. A more expensive vehicle doesn’t always cost more to insure

That ’ randomness why it ’ sulfur crucial to figure out what your insurance will cost for the diverse models you ’ re considering when you start shopping for a new vehicle. “ An expensive sport utility might have better title rates for accidents or thefts than a lower-priced car, so the premiums end up costing less, ” said Penny Gusner, consumer analyst for Insurance.com .

4. There are ways to pay less for auto insurance

There may be respective ways to lower your policy bill. In some cases, that means reducing coverage. For case, you might want to drop comprehensive coverage on an old vehicle.

Raising the deductibles, what you ’ ll pay before policy kicks in, is another money-saving move — if you can afford to cover the potentially higher out-of-pocket costs. According to the Insurance Information Institute :

  • Increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30 percent.
  • Going to a $1,000 deductible can save you 40 percent or more.

indemnity companies offer discounts for low-mileage, multiple cars, dependable drivers ( no moving violations in three years ) and students with good grades — barely to name a few. You may besides be able to get a better price for bundling car and homeowner ’ s coverage with the same company .

5. Personal auto insurance doesn’t cover using your vehicle for business

Most policies exclude driving a personal fomite for business purposes. many companies will cancel your policy if they discover you ’ re doing this. “ People need to be mindful that if they do any kind of side gig — pizza delivery, messenger or ride-share driver — they need to make certain they ’ rhenium covered, because if you ‘re in an accident, you might be on the hook for everything, ” Gusner said. talk to your policy caller about getting an “ second ” to your policy for that clientele driving. Ride-share drivers — such as Lyft and Uber — have full coverage from the ride-share company when they have a customer in the fomite. It ’ south when they ’ ra driving around waiting for the adjacent passenger that they ’ ra at hazard. The lend coverage provided by a business use endorsement is reasonable, typically $ 10 to $ 20 a calendar month, according to a survey by NerdWallet .

6. Let someone drive your car, and your insurance will pay if they have an accident

The general rule is : Auto insurance follows the car, not the driver. “ If you loanword your cable car to person else, you ‘re basically loaning them your car arsenic well as your policy, in most cases, ” said Eric Madia, vice president of the united states of product purpose at Esurance. therefore unless it ’ s an hand brake, or you ’ ve been drinking, you need to think about the insurance implications of letting person else get behind the rack of your vehicle .

7. Let your car insurance lapse and it could drive up the price when you need it again

It ’ mho tempting to cancel your car insurance when you don ’ thyroxine design to drive for an extend period. It ’ sulfur besides easy to forget to pay a bill. Whatever the reason, if you let your coverage lapse, your indemnity rates will be higher should you need coverage again down the road. As Esurance notes in a blogpost : “ Car indemnity companies consider the uncover to be higher risk than those who diligently keep their policies in force. And even a one-day relapse in coverage can lead to higher rates. ” If you won ’ thyroxine be driving the cable car for a while for some reason, contact the insurance company and see what options you have .

How to get the best price on auto insurance

Buying policy is like any other purchase : If you want the best price, you need to comparison shop. Every policy company has a different underwrite policy which results in different prices. You can compare policies side by side at sites such as InsuranceQuotes, Esurance and Insurance.com.

“ Insurance rates vary, sometimes by hundreds of dollars a year, with unlike insurers, ” said Worters at the Insurance Information Institute. “ You want to make sure you have an car insurance company that has a thoroughly rate, offers good rates, but besides provides good service. ” For those who already have car indemnity, Consumer Reports suggests doing a rate confirmation every two or three years. “ By looking beyond just a couple of insurers, you ’ ll have a better shoot at savings, ” the editors write. You should besides shop the market whenever your personal circumstances change, such as getting married, divorced or moving to a different house or apartment .

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