You may have noticed the frequent television commercials from various insurance companies touting low priced car insurance, insurance tailored to fit your budget, or even offering deals for people looking to switch insurers. Most commercials do not go into specifics about the cost for different policies, premium rates, or overall costs. So, it can be difficult to determine exactly what type of car insurance fits within your budget. How much is car insurance? The answer is that it depends upon a number of factors: the insurance policy, your needs, driving record, and much more. This article explores several of these factors to give you a better idea of the amount you can expect to spend on car insurance coverage.
Different Types of Insurance
Cheap insurance does not necessarily mean good, quality insurance. Each state requires drivers to carry a minimum amount of insurance, but there are additional coverage options that you should consider as well. These include: collision, comprehensive, underinsurance and uninsured, and personal injury protection insurance.
Aside from New Hampshire, every state requires that drivers have liability insurance. If you are at fault, or partly at fault in an accident, this coverage protects the other driver and their vehicle. For example, you are driving in heavy rush hour traffic and the cars in front of you suddenly put on their brakes. You weren’t paying enough attention and did not brake fast enough. You end up slamming into the car in front of you, causing damage to their rear bumper. In addition, the driver broke their nose because the airbags deployed. Liability insurance has three components: total bodily injury protection per person, total bodily injury protection for two or more injured persons, and total property damage coverage. Thanks to this policy, the other driver’s medical bills to fix their broken nose, as well as the cost to repair their bumper and reset their airbags, are covered.
According to the Insurance Information Institute, the average cost for liability insurance was approximately $518 per year in 2013. This number varies based on your state of residence. For example, in New York, drivers pay an average of $791 annually, while Iowans only pay $291 per year. The insurance cost will increase if you purchase additional coverage, which many experts recommend. The most common insurance policies include:
- Collision: This policy will help pay for damages to your own car if you were at fault or partly at fault in an accident. This includes incidents with other cars or stationary objects like streetlights or fire hydrants. The average collision insurance cost in 2013 was $297.
- Comprehensive: This policy will help pay for damages to your own car in the event of a loss other than an accident. This includes theft, bad weather, vandalism, animals, and falling items. The average comprehensive insurance cost in 2013 was $139.
- Underinsured and uninsured: These two policies will help to cover costs related to bodily injury or property damage if the other driver has little or no insurance.
- Personal Injury Protection: This policy will help pay for bodily injury protection no matter who was at fault for the accident.
The total amount that each driver spends on car insurance will vary, depending upon the policy they choose, their state of residence, personal information, and driving history. However, the overall annual average as of 2013 was $841. Speak with your independent insurance agent to determine the right amount of coverage to suit your needs and your budget. They will have more up-to-date and accurate information about the cost of each car insurance policy.
Determine Your Need
Now that you understand the most common car insurance policies available, it is time to determine your need. How much insurance do you want to buy, and how will it fit into your budget? Working with an independent insurance agent, first make sure that you have secured at least the minimum insurance required in your state. Next, examine your budget. The more insurance coverage you have, the higher the monthly premium expense. Go over your spending habits to determine how much you can afford for insurance each month. This will also help you decide whether or not you should take on additional forms of coverage.
Next, consider the amount of risk you can afford. If you get into a car accident, how much will you be able to spend out-of-pocket on a claim? If you only have minimum coverage, but get into a severe accident, the other driver may file a lawsuit for the additional medical and property damage expenses that exceed your coverage. For example, you may only have $25,000 in bodily injury coverage under your liability insurance, but the other driver’s medical bills cost $50,000. They could sue you for the additional $25,000. A small premium hike could raise your liability limits and prevent such an incident.
Lastly, consider your car. A vehicle with a higher value should be protected with additional insurance. This may be a newer car, an expensive make or model, an antique, or collector car. Consider collision and comprehensive insurance so that, in the event of a loss, the repair costs are covered. This may raise your annual insurance cost an average of $300 for the two additional policies, but it is well worth it. You will have peace of mind knowing that your brand new car is protected against wider variety of potential incidents.
If you want to know the actual cost per year for your specific auto insurance policy, speak with an independent insurance agent. They will discuss the factors that determine whether or not your car insurance will be higher or lower than the national average. Several of these factors include:
- Your age: teens and seniors are more likely to get into fender benders, and will therefore have higher insurance rates
- Your driving record: past accidents and traffic violations will increase your rates
- Marital status: married couples have lower insurance rates
- Car make and model: a more sensible car is less likely to be stolen and is cheaper to repair after an accident, so the rates will be lower
- Credit history: if you have proven yourself to be financially responsible in the past, you will likely be offered a lower insurance rate
- Driving habits: the annual mileage you put on your car, purposes for using your car (business or personal), and where you park (street, lot, or garage) can all make a difference with your rate
When you apply for car insurance, your independent insurance agent will have you fill out a form. It will ask a variety of questions pertaining to each of the factors listed above. From there, the agent will discuss types of car insurance. Then, you will be offered a specific annual rate.
Your annual rate is called a premium. Your premium ensures that you will have coverage for the entire year. It can be paid at the beginning of your policy year, or in installments. Some insurers allow you to pay monthly, while others have options to pay for 3 or 6 months of coverage at a time. Your premium is directly connected to your deductible, which is the amount you will have to pay out of pocket after filing a claim. If you are willing to take on the risk of a higher deductible, then your premium will be lower. If you’d rather have a lower deductible to pay at the time of a claim, then your premium will be higher.
Your independent insurance agent may be able to help save you additional money on your car insurance through various discounts. For example, if you have homeowners or renters insurance through the same insurer, you may be offered a bundling discount when you purchase your auto policy. If you are willing to forgo paying your premium by mail, and instead have the payment taken out of your bank account automatically, then you might qualify for an electronic funds transfer discount. There are many other discounts and ways to save as well. Speak with your independent agent to discuss how much car insurance costs and how to reduce your annual premium. They will have the knowledge and experience to recommend the right policies to fit your budget.
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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
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