You’ve probably spent plenty of time watching YouTube reviews of your dream car, sussed out the best customisations and upgrades available, and looked at a few safety features. However, you’re probably not as dedicated to searching for the best car insurance.
Most people looking to buy a car know far too little about car insurance. If this sounds like you, this article will give you the heads-up you need to know.
#1 – Understanding Car Insurance
Also known as auto or motor insurance, car insurance covers you against financial losses caused by an accident or other damage to your car. There are three reasons for getting individually assessed insurance:
- It covers any damage you cause to another individual and their car – or another’s property.
- It covers and protects you, your passengers, and your vehicle in terms of medical payments, collision, and comprehensive coverage.
- It helps you comply with state or federal law.
#2 – Types Of Car Insurance
Liability Coverage – Car liability coverage, also known as third-party coverage, is mandatory in most countries, including Australia. Drivers must get at least the minimum liability coverage set by the state law. In general, liability coverage consists of:
- Bodily Injury – If you cause an accident, this covers the costs related to another individual’s injuries.
- Property Damage – Covers the damages you cause to another individual’s property while driving.
- Collision Coverage – Covers the repair or replacement of your car (actual cash value minus deductibles) if you crash another vehicle or an object like a streetlight post. Collision coverage is often optional. However, it may be required by your car’s lender or leaseholder.
Comprehensive – As its name implies, a comprehensive policy protects your car from pretty much anything that may happen to it. This policy includes everything from vandalism and theft to hail or fire damage. The insurer will pay for the repair or replacement of your vehicle if required.
A comprehensive policy is an optional coverage, however, your lender may require it if you’re paying off or leasing your car.
Underinsured And Uninsured Motorist Coverage – This type of policy helps protect you against damage and bodily injuries from accidents caused by uninsured drivers (those without car insurance) or underinsured drivers (those with car insurance but limited liability).
Medical Payments – If you or other family members drive an insured vehicle are injured in a car accident, a medical payments policy can help cover the costs associated with the injuries. These costs include surgery, hospital visits, X-rays, and more.
Additional Insurance Coverage – Depending on your needs and situation, you may add the following optional policy to your car insurance.
- Gap coverage
- Rental reimbursement coverage or transportation expense coverage
- Ride-sharing coverage
- Labour and towing cost coverage
- New car replacement coverage
- Classic car insurance
- Sound system coverage
- Personal injury protection
#3 – How Is The Price Determined?
Comparing different car insurance policies, you might be wondering how these prices are computed. Each insurance provider has its own formula for calculating the premium costs, but they often use the same fundamental factors below.
Who You Are
Insurance providers will look at your gender, age, marital status, education level, homeowner status, and credit score when working out your premiums.
Statistics show that young and male drivers are more likely to get into an accident. Thus, they are perceived to be more risky to insure. Meanwhile, married drivers and master’s degrees tend to have lower risk, and are less likely to file an accident claim.
Where You Live
If you live in an area with high rates of uninsured drivers, crime, or in a densely populated place where drivers file many claims, the insurance company will consider you a higher risk to insure than people living in rural areas with fewer car crimes and less traffic.
Your Vehicle Type
Performance vehicles, luxury cars, and foreign-built models are more expensive to repair. Thus, they are more costly to insure. However, if you drive a domestic vehicle and models, you’re less of a risk for car insurance providers.
How You Drive
Insurance providers also factor in how many kilometres you drive and whether you use your car for leisure travels or work. People using the car for business purposes tend to spend more time on the road, therefore making them more at risk for accidents. In addition, companies also look at any record of previous DUIs, speeding tickets, and accidents. A clean record may get you lower rates.
For most people, cars are one of the most significant expenses you can make in your lifetime. So, it is best to protect that investment, yourself and those around you, with the right car insurance. Taking your time to learn and get the right car insurance policy can help save you a lot of money and stress in the long run.