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Auto Insurance - The Basics
Auto Insurance also known as Vehicle Insurance, is insurance coverage on motor vehicles against damages as well as coverage against injuries caused to drivers, passengers, and related third parties in an accident involving the vehicle. In United States, the laws on auto insurance vary from state to state, but in most cases, 3rd party liability insurance is mandatory. There are numerous auto insurance providers who offer generic as well as customized vehicle insurance policies. The premium rates of auto insurance policies vary depending on the risk factor of the insured as well as the extent of coverage taken.
The most basic coverage in auto insurance policy is medical and life coverage for 3rd parties involved in accidents. This requirement is mandatory in most states, however the liability may vary. It is therefore recommended that you enquire with your local DMV office on these mandatory requirements. The second most important coverage is on medical costs and life insurance due to death of the driver and the passengers, caused by an accident in which the car was involved. Other major components in an auto insurance policy are coverage against loss or damage to the vehicle as well as damage to any 3rd party property. While you need to surely purchase the mandatory coverage, including the extra coverage like repair costs etc would depend on your budget.
The premium rates in auto insurance are decided depending on the risk estimation of the driver. The common considerations are as given below:
- Age of driver: Statistics show that young drivers, especially teenagers, are more prone to rash driving and accidents. Also young drivers who have no prior driving records are charged higher premium rates. Many insurance companies offer attractive discounts to youngsters with good school and college grades as they are considered to be more careful.
- Gender: Men are considered to be at higher risk of accidents than women. This can be simply attributed to the fact that on an average, men drive more than women. This is more apparent in case of young drivers as insurance companies generally keep lower youth surcharges for young women drivers than young male drivers.
- Driving History: This is an important consideration for insurance companies while quoting insurance rates. Drivers with prior records of reckless driving and traffic violations are considered high risk drivers. It is therefore strongly recommended that you sort out any pending tickets or unfavorable records with your local DMV office to lower your auto insurance premium rates.
- Vehicle classification: Other important considerations for insurance providers while underwriting motor insurance are the retail cost and performance capability of the vehicle. If vehicles are modified to perform differently than the manufacturers' specifications, the premiums of auto insurance are generally higher. This is also true in case of luxury vehicles especially in terms of premiums on physical damages.
The best way to reduce your premiums of an auto insurance policy is to carry out a complete market survey. It is strongly recommended that you compare the various products offered by at least 4-5 insurance providers before purchasing your auto insurance policy.