If you live in a state where car insurance is mandatory, such as New York, or New Jersey, you may already have some idea of the workings of car insurance. Basically, car insurance is there to protect you, the driver, as well as other highway users, including pedestrians, who may become involved in an accident involving your vehicle.
Some states, due to high accident rates, or higher crime rates, have instituted laws that prohibit you from operating a motor vehicle without proper insurance. Even if your vehicle is not driven regularly, unless it is a motorcycle, these states demand that your registered motor vehicle be insured.
The least insurance you may have in one of these states is called Liability insurance. Basically, this means that you are covered for any injury or damage that you may cause another person or vehicle. It is available at 25/50/10 at the minimum. That’s $25,000 for injury caused to another, up to $50,000 for all, and $10,000 for property damage.
Your state may also require what is called No-Fault insurance. This means that that money is put towards injuries sustained by an accident, regardless of who was at fault. The way that no-fault insurance works are that all money collected from No-Fault insurance is put into a fund that is paid to hospitals and doctors who treat you for injuries caused by a motor vehicle accident.
Be aware of your no-fault deductible. Many insurance companies offer low rates and then inform you of exorbitantly high deductibles for no-fault. This means that you have to pay that amount, up to $1000.00, before the insurance picks anything up.
Full coverage is usually required when your motor vehicle is being financed, either through the bank or with an automotive financing company. This is to protect the interest of the lender, in case the vehicle is stolen, or damaged while it is being financed. You can expect to pay a higher premium for full coverage, however, extras such as glass protection or lower deductibles are not mandatory, and may lower your premium. Glass can be expensive, though, and some folks prefer to pay an extra fifteen or twenty dollars a month instead of a few hundred to replace shattered windows, especially in some of the newer SUVs.
As it was mentioned earlier, watch your deductibles. You may get a lower monthly premium by agreeing to a thousand dollar deductible. That means you pay the first thousand dollars either of damage, fire, or theft. If you are driving an average car, such as a Honda, or a Toyota, minor damage may not come near the cost of your deductible, which means you’ll be paying out of pocket until the damage reaches over a thousand dollars.
The deductible also may expire either by period or by year, which means that your agency may renew the deductible every six months. You could find yourself shelling out 900.00 one month, having the period renew the next, and having to shell it out again a month or two later. Read your agreement, and ask you, agent, to explain anything you don’t understand.
It is advisable to shop around before signing up with an agency. Don’t go with the guy right outside your Motor Vehicle office simply because he issues ID cards on the spot. Get some quotes. If you have a good clean record, you can sometimes negotiate for better rates, but remember, especially in states where insurance is mandatory, lower rates are not always the best way to go.
Insurance works both ways, and you get what you pay for. If you are involved in an accident with a person who has no insurance, you have the option to sue for damages, but many times there is nothing to recover, and a judgment against the driver will be the most satisfaction you may get. Likewise, if you are caught driving without insurance, you will be subjected to fines and the possibility of having your license to drive revoked.
Be smart, shop around, and ask your agent to explain. A broker can sometimes be the best way to go, well worth the small fee associated with the service to find a company that’s best for you.