Every thirteen minutes, one individual in the United States loses his or her life due to a vehicle crash; that is, 43,000 Americans each year. Nearly 3 million people are injured each year, some as a result of minor fender-benders while others from head-on collisions, rollover wrecks or other types of auto accidents resulting in permanent disability or severe injury. Consequently, victims and/or victims' families must cope not only with the emotional trauma but also the financial hardship flowing from property damage, medical expenses, and lost wages. Evidently, driving constitutes an inherently-risky activity, irrespective of whether one is cruising on a bottlenecked stretch of highway or on a deserted country road. Car insurance provides an indispensable buffer against this risk by saving motorists as much as hundreds of thousands of dollars and protecting them, their property, their passengers, and third parties.
Auto insurance coverage is the most commonly-purchased insurance product. It is a requirement in each state that drivers carry minimum liability coverage; this ensures that they can cover the costs related to property damage or personal injury. The core of a typical automobile insurance policy is composed of the following types of coverage:
| 1. |
Property Damage Liability - insures against property damage caused by the insured and incurred by third parties |
| 2. |
Bodily Injury Liability - covers bodily injury claims when the insured is at fault for the accident |
| 3. |
Physical Damage Coverage - protects against damage to the insured's vehicle |
| 4. |
Medical Payments (Medpay) Or Personal Injury Protection (PIP) - reimburses medical bills of both the policy owner and his or her passengers, irrespective of who is responsible |
| 5. |
Uninsured And Underinsured Motorist Coverage - insures against a negligent motorist who has inadequate or no insurance |
| 6. |
Comprehensive Coverage - insures against physical damage (unrelated to crashing) to the policy owner's vehicle as a result of falling trees, vandalism, fire, theft, or acts of God such as hail, earthquakes and volcanic eruptions |
When purchasing a car insurance policy, consumers should ensure that it provides adequate coverage and that it best suits their needs and financial situation. By shopping around for competitive rates, prospective policyholders can save up to 40-70% on auto insurance rates. A Consumer Reports study found that the view held by two separate auto insurers vis-a-vis the same consumer with battered credit differed by as much as forty percent. Cheap car insurance may be found by comparing, online or via telephone, the plans and prices offered by multiple insurance carriers and agents.
Nearly every major insurance provider posts its rates online and delivers free, instant insurance quotes. The process of requesting an online quote is simple and expeditious (less than 5 minutes). Prospective policyholders complete a quote form by entering their zip code and personal information such as their date of birth and email address. Quotes are processed within minutes, enabling the inquiring online visitor to save hundreds of dollars and find the rates on their specified life insurance, health insurance or auto insurance coverage.
A few states provide pricing guidelines for different types of car insurance coverage and post the information online. Consumers may also contact their state's department of insurance and find out if it has any pricing data available. To determine insurance rates, numerous auto insurers employ a tier system whereby motorists are classified as substandard, standard, or preferred. Car insurance premiums depend on a variety of factors including the following:
- Age (car insurance rates drop at age 25)
- Amount of coverage desired (cheaper rates for full coverage with liability limits that are is higher than the legal minimum)
- Credit history
- Driving history (i.e. accidents, claims)
- Gender
- Model, make, and year of vehicle
- Number of years insured by the same provider
- Place of residence (lower premiums for residents of rural areas and for city dwellers with garage space)
Premiums may be reduced by maintaining a clean driving record. Motorists with tarnished driving records should inquire about the insurer's forgiveness period, or the requisite time needed for accidents to be erased from their driving record and for the premium to be reduced. Another way for policyholders to lower their car insurance rate is by purchasing a vehicle that is economical and has a low maintenance cost and high safety rating. Insurance rates applicable to SUVs are generally 10-20% higher than for sedans and other vehicles due to the fact that the former cause greater damage when involved in accidents. Insurers also consider an applicant's credit history and payment history in calculating the premium. Customers with a stellar credit rating benefit from lower insurance rates. Also, by raising their deductible, consumers may lower their car insurance rates by 10-20% and save thousands of dollars. Other ways to reduce premiums are by (1) purchasing online car insurance (savings of up to 10%), (2) setting-up automatic payment by providing a bank account or credit card number to the insurer, and (3) increasing liability coverage.
Prospective purchasers may avail themselves of the following discounts commonly offered by car insurance companies:
- Low mileage
- Discount for vehicle equipped with safety features such as airbags, automatic seat belts, and anti-lock brakes
- Installation of an anti-theft device such as an alarm or tracking system on the vehicle
- Multi-policy discount (purchasing different types of coverage from the same insurer, typically homeowners insurance)
- Insuring all vehicles with the same insurer (multi-vehicle discount)
- Payment of premium in one lump sum
- Enrollment in an accident prevention course or defensive driving course
- Good grades discount for teenagers
- Long-term policyholder discount (i.e. for a minimum period of five years)
- Discount for homeowners
Finally, consumers should shop for both price and service. Since most motorists will file a claim at some point in time, they should choose a car insurance provider that is both responsible and pro-active. To research an insurer's solvency, they may consult companies such as Standard & Poor's Insurance Ratings Service and A.M. Best Company Incorporated.