FAQ About Car Insurance

Car insurance is a crucial component of vehicle ownership because it provides protection for the policyholder and other drivers on the road.  Knowing the right questions to ask when purchasing this vital product will ensure that you get the coverage you need to safeguard your financial future.  A list of frequently asked questions about car insurance should provide you with a good starting point.

While car insurance is a product that most people have, many are not sure about the specifications of insurance and what the coverage really means.  Car insurance is a required component of owning a vehicle and the main thought that is given to its purchase is the price.  Automobile coverage is too important to leave the details to chance.  Some frequently asked questions that will assist you in procuring coverage include:

1. What is liability coverage?  The liability portion of your insurance policy covers you against the threat of financial ruin posed by the drivers and inhabitants of other vehicles should you be involved in an at-fault accident.  This is termed as third party coverage.  Each state has a minimum liability requirement that specifies the lowest amount of liability coverage you can obtain while still being in compliance with the law.  Liability premiums tend to be quite low so shooting for higher limits will give you more protection and greater peace of mind.


2. How can I cover my vehicle against damage?  Comprehensive and collision coverages are first party, meaning that your insurance company will pay to fix your car if a natural disaster occurs (comprehensive) or if you hit another person, place or thing (collision).  These coverages often have deductibles, meaning that there is a portion of the damage that the policyholder must pay before the insurance company will kick in the money for repairs.  A lower deductible will incur a higher premium but can be a lifesaver if an accident occurs and you don't have a lot of spare money handy.


3. How is my premium determined?  This is a multi-faceted question with many answers.  Insurers employ a number of factors to determine premium rates, including driving history, credit score, zip code, vehicle type, vehicle features, and mileage.  To get the lowest possible premium avoid speeding tickets, pay your bills on time and purchase a moderately priced vehicle that is inexpensive to repair.

Car insurance can be difficult to understand if you don't ask the right questions.  Use this short list of frequently asked questions to gain a better understanding of your insurance coverage and possibly obtain a better rate.