There is a widespread consensus that most people are
confused or unaware to a certain extent about car insurance in North America.
And with the various amounts of insurance providers and types of coverage, the
confusion seems to be justified. Here we will break it down for you so that you
can choose the right coverage for yourself and be able to pass on your
knowledge to the people around you. We will begin by breaking down the basics
and then move to discuss some generic policies.
Before you start reading about car insurance online or
talking with an agent, you must make sure that you are aware of some insurance
terms commonly used. Some of the useful ones used in car insurance are
described below:
1. Insurer
The company or entity that provides the insurance is known as the Insurer. In United States, State Farm,
Geico, AllState and Liberty Mutual Insurance are some of the main insurance
providers.
2. Insured or Policyholder
The entity or person who buys the insurance from the insurer is known as
the Insured or Policyholder. If you buy the insurance, you are the Insured.
3. Liability
When and if you are liable, you are basically responsible for the act
that you are liable for. In simple term, liability refers to the state of being
responsible for something. In most insurance cases, it refers to either paying
an amount to another party.
4. Deductibles
Deductiblerefers to the amount
that the insured party has to pay before the insurance company will cover the
rest of the cost of any loss. For example, if your accident costs you $100, and
your deductible is $10, you have to pay $10 before your insurance company pays
the remaining $90.
5. Third Party
The third party is referred to
the entity or people that are part of a legal situation due to the act of the
insured. This may either be the state or another person that the insured may
have caused damage or harm to. It may also be referred to the person who has
initiated a lawsuit against the insured.
6. Insurance Premium or Premium
The premium is the amount that
is paid monthly by the insured to the insurer against the policy. It means that
this is the amount you pay in order to remain insured by the provider or
insurer.
7. Quote
A quoterefers to the estimated
amount provided by the insurer after the possibly insured has provided his
information. It is not an offer but an amount that is close to the actual
premium amount if the person agrees to a policy with that insurer.
To begin with, it is important that you get a quote from as
many insurers as possible. These will help you make the best decision by
getting you the best deal on premiums. You should also familiarize yourself
with your state law regarding car insurance.
Once you have selected the insurer, your personal details
will determine the premium amount and other arrangements of your policy. These
details include the model of your car, the type of your car and number of
people being insured, your income and your credit score. Once you have agreed
to the terms and agreements of the policy, you will receive details of your
insurance policy along with an insurance card that must be kept in the insured
vehicle at all times. You may notice some numbers on the card written in the
form 50/100/50 or 10/20/10. These
numbers represent the limit of funds that will be used on your coverage.
·
The 1st number stands for $50000.
This is the amount available to cover the liability cost for the injury of one
person involved in an incident.
·
The 2nd number stands for $100000.
This is the amount available to cover the liability cost for the injury of all
persons involved in an incident.
·
Finally the 3rd number stands for
$50000. This is the amount that covers the property damage that was caused by
the incident.
All the numbers are maximum
values of the available funds. The insurer will not exceed this amount.
There are some types basic coverage that are offered by
insurers. We will discuss some of them below:
1. Liability Coverage
Liability coverage covers the cost of any liability that may fall on the
insured in case of an incident or accident for which the insured is
responsible. This includes property and bodily damage caused by the insured to
the third party. There is a minimum requirement of the amount of liability
coverage in most stage which must be met.
2. Uninsured/ Underinsured Motorist Coverage
In most states it is required by the law for a driver and vehicle to be
insured before the person car drive. This is not usually the case in life. Even
if they do have coverage, they may have the minimum coverage which is not
enough to cover all costs. To cover these expenses, the Uninsured and
Underinsured motorist coverage helps, making you safe from the irresponsibility
of others.
3. Collision Coverage
Collision coverage covers the vehicles involved in a collision. This
includes the expense of repairing a damaged vehicle and paying the value amount
of the car if the car is totaled in the collision. It may not be useful to
carry collision coverage if your car is old. If you have a new car though,
collision coverage can cover your cost and help you regain the lost amount.
4. Rental Coverage
Rental coverage covers the cost of renting a vehicle when you are
involved in a collision and your car is being repaired. It may also refer to
the waiver that a rental company makes the person sign before a car is rented
to them. This includes covering the liability in case the rented car is liable
of an accident.
5. Full Coverage
Full coverage refers to the combination of above mentioned coverage such
as liability coverage, collision coverage and rental coverage. It may also be
referred to as comprehensive coverage
in some countries. The term may be misleading because even though it says
‘full’, there are types of this coverage that vary in amounts due to the
options they provide. So before you get excited about your full coverage, make
sure to be thorough in understanding the terms of agreement and the coverage it
provides.
The basics of car insurance may not be as simple as they
seem. The insurers constantly check your file and keep it updated in order to
make sure that your credit score and your driving history is clean and remains
that way. You are likely to get a higher quote if you have a new car, a bad
driving record or a bad credit history. To keep your premium costs low, try and
paying up the insurer upfront rather than dividing it over a period of time,
keep a good credit score and raise the amount of deductibles on your policy.
Insurance is necessary whether you like it or not and it is better to be
informed rather than learning by mistake once you jump into dealing with it.
