Most states have legal requirements for automobile insurance, which is a financial agreement between an individual and an insurance company. It provides coverage for losses brought on by covered events or incidents. Common forms of coverage are comprehensive coverage, which covers damage from events other than collisions, collision coverage, which covers damage to an automobile if it collides with another item, and liability policy, which pays for injuries or property damage resulting from an accident.
Auto insurance covers your vehicle against a range of risks, including accidents, collisions, and theft. It ensures that your investment is safeguarded from unexpected events.
Accidents can happen, and if you're at fault, liability coverage provides financial protection against injuries or property damage sustained by others in the event of an accident.
Auto insurance includes coverage for medical expenses if you or your passengers are injured in an accident, regardless of fault. It offers peace of mind knowing that you're financially supported during challenging times.
Life on the road can be unpredictable, but your safety and peace of mind don't have to be. At Portfolio Insurance Agency, our auto insurance options provide you with the protection you need to navigate the highways and byways with confidence.
WHY YOU NEED AUTO INSURANCE
Auto insurance is an important purchase for most drivers. There are three main reasons to buy auto insurance.
1. To comply with state laws
Most states have auto insurance requirements. If you drive without insurance, you could be fined, and your vehicle could be impounded.
2. To satisfy your lender
If you have a car loan, most lenders require you to have insurance to protect their interest in your car. If you let your insurance lapse, your lender will likely have your car insured. The premium may be much higher (and the coverage much less) than a policy you would buy on your own. The lender can require you to pay this higher premium until you get your own auto insurance.
3. To protect your assets
Auto insurance can provide bodily injury and property damage liability coverage for accidents that happen to others for which you are responsible. Liability insurance also will pay the cost of an attorney to protect you if you’re sued. The state-required minimum coverages are usually not enough to fully protect you and your assets. Auto insurance also may cover the cost of accident-related repairs to your insured car, as well as your accident-related medical bills and lost wages.
COVERAGES IN AN AUTO POLICY
An auto insurance policy usually has several types of protections or “coverages” — some required and some optional. Some coverages may automatically be part of your policy unless you opt out of them. You must decide what coverages best fit your needs, which may mean choosing more coverages than you need to meet requirements.
Your auto policy may include the following coverages. Each coverage is usually priced separately.
Required by State Law
• Bodily Injury Liability: This coverage applies to injuries that you cause to someone else. You and family members listed on the policy also are covered when driving someone else’s car with their permission.
• Property Damage Liability: This coverage pays for damages you cause to someone else’s car or to objects and structures your car hits.
Required by Your Lender if You Have an Auto Loan
• Collision: This coverage pays for damage to your car from a collision with another car, an object or a pothole or from flipping over.
• Comprehensive: This coverage reimburses you for damage to your car that’s not caused by a collision. This includes theft, hail, windstorm, flood, fire and hitting animals. Comprehensive coverage also will reimburse you if your windshield is pitted, cracked or damaged. Some companies won’t charge you a deductible for windshield repairs.
Most insurers offer many other types of coverage, such as for towing and rental car when your car is disabled. Each type of coverage likely will increase your premium so consider carefully what you need.
Most auto policies don’t cover equipment — including stereos, CD players, navigation systems and cell phones — not permanently installed in your car, or maintenance for your car.
Auto insurance doesn’t cover paying off your loan if your car is damaged and its market value is less than what you owe. Auto dealers and lenders may offer guaranteed auto protection (GAP) insurance for this purpose.
Your auto insurance will cover you if you drive into Canada. To drive into Mexico, however, you’ll need to buy Mexican auto insurance. Ask your insurer about other requirements.
You’ll likely need a separate insurance policy for these types of vehicles:
• Motorcycles
• All-Terrain Vehicles (ATVs)
• Off-Road Vehicles
• RVs
• Commercial Vehicles
Auto insurance policies have specific exclusions—situations or risks for which your insurance company would not provide coverage. Let’s explore some common exclusions:
HOW INSURERS DETERMINE YOUR PREMIUM
Many factors affect the premium you pay, including which insurance company you choose. Different insurance companies use different methods to rate their risk of insuring you and charge different premiums for similar coverage.
These items will likely affect your premium:
Your driving record, and the driving records of others covered by your insurance policy, during the last three to five years.
• Your credit-based insurance score. Those with better scores often pay lower premiums. Some states restrict the ways insurers can use credit-based insurance scores and several states ban their use. If you’ve had a hardship which may have hurt your credit history, ask your insurer if it will consider a life event exception.
Credit-based insurance scoring. Most insurers use the information in your credit report to calculate a credit-based insurance score. They do this because studies show a correlation between this score and the likelihood of filing a claim. Credit-based insurance scores are different from other credit scores.
• Your age, gender and marital status. People under 25, males, single people and families with young drivers in the household tend to have more accidents and therefore pay higher premiums. Accident rates (and premiums) also tend to increase for people over age 65. Insurance companies can base premiums on all insured drivers in your household, including those not related by blood, such as roommates.
• The type of vehicle you drive. Generally, you’ll pay more for insurance, particularly for comprehensive and collision coverages, if your vehicle is newer or more expensive. Sports cars and high-performance vehicles also cost more to insure because they’re involved in more accidents and thefts and cost more to repair. If you drive a large SUV or truck, which can cause more serious damage in an accident, you could pay more for liability coverage.
• Where you live. Urban areas usually have more accidents and auto thefts than rural areas.
• Vehicle use, including your annual mileage.
• Your prior insurance coverage. Most insurance companies will charge you more if you don’t have auto insurance when you apply for coverage. Some also charge you more if you currently have only the state-required minimum amounts of coverage.
Previous claims. Most insurance companies report your auto claims to one or more private nationwide claim databases (such as the Comprehensive Loss Underwriting Exchange—CLUE). Insurance companies use these databases to see the claims you’ve submitted in the past. You have a right to a free copy of your CLUE report.
• The limits you choose for liability coverage.
• The deductibles you choose for comprehensive and collision coverages.
A deductible is the amount you have to pay out-of-pocket on a claim before the policy pays the loss. Higher policy deductibles mean lower policy premiums. A policy with a $1,000 deductible has a lower premium than the same policy with a $500 deductible. Having a higher deductible is a good way to save money on your auto insurance premium and to submit fewer claims. But be sure you can afford the deductible in case you have a loss.
Discounts
Most insurance companies offer various types of discounts. Ask the agent if there’s a discount for:
• Insuring your auto and your home with the same insurance company.
• Insuring multiple vehicles with the same insurance company.
• Protection devices such as airbags, anti-lock brakes and anti-theft devices.
• Taking a defensive driving course, particularly if you’re 55 or older.
• Being a member of an organization or working for certain employers.