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Whether you’re buying a car for the first time or you’ve purchased many cars in the United States, it’s always a good idea to learn more about auto insurance. Auto insurance is required, but you’ll want to purchase more than the minimum coverage possible. Doing so could alleviate your liability in an accident. After reading this article, you’ll have a better understanding of the type of coverage you need.
This article discusses several topics about auto insurance. You’ll discover what auto insurance is as well as the legal liability of automobiles. The article also discusses how insurance can be acquired for individuals that are considered high-risk drivers and the factors that determine your premium.
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General Overview of Auto Insurance
Automobile liability insurance covers the loss that results from legal liability if a bodily injury or property damage occurs because of a covered insured’s automobile. Automobile medical payment coverage provides reimbursement for medical expenses that arise from an automobile accident. Family members and other individuals in insured vehicles are also covered.
Automobile physical damage covers the loss of the insured’s automobile through collision coverage. Comprehensive coverage is an open perils coverage that provides for any types of insurable perils besides a collision. Collision coverage covers losses that arise because of collisions with inanimate objects.
Uninsured motorists coverage is designed for insurance companies to pay the insured the amount that would be collected from a negligent driver that did not have insurance or committed a hit-and-run accident, or who is insured by an insolvent insurance company.
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Legal Liability of the Automobile
An individual may become liable for the actions of another driver because of the vicarious liability where one party can become liable for the negligence of another. Many states have laws requiring compulsory automobile liability - individuals involved in an accident that causes bodily injury or property damage must provide proof of the ability to pay any judgment that results from the accident or face the loss of their license. The law can be satisfied by using an automobile liability policy.
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Auto Insurance Considerations
Insurance for High-Risk Drivers
Some drivers can be uninsurable because of their driving record. However, they can still be covered through different avenues. An automobile insurance plan is a risk-sharing pool that auto insurance companies can use to insure high-risk drivers. The pool will provide auto liability insurance for individuals that cannot obtain insurance through normal channels. The pool provides an equitable distribution of risk among the insurance companies. Several states participate in reinsurance pools and joint underwriting associations to permit the insurance of high-risk drivers.
Auto Insurance Cost
The Insurance Services Office (ISO) established a rating system to determine auto insurance premiums based on a number of factors: Territory, age, sex, and marital status, use of an automobile, driver education, good student discount, number and type of automobiles, driving record, credit score.
Territory can be defined as the geographic location. It is an important element in determining the premium. Certain areas of the country have a higher claim frequency or severity than other areas, which increases the cost of insurance. Cities will generally have higher premium rates than rural areas.
Age, Sex, and Marital Status
Young male drivers have the highest rates of automobile accidents. Due to this, young male drivers end up paying the highest insurance rates. Young female drivers tend to have lower accident rates than young male drivers. Young male drivers who are married have lower rates of accidents than those that are unmarried.
Use of Automobile
There are different classifications of the use of automobiles.
- For farm use
- Personal use
- Commuting to work either less than or greater than 15 miles away
- Business use
The lowest rating factor is for farm use, while the highest rating factor being for business use.
Young drivers could potentially receive discounts or credits upon completing a driver education course.
Good Student Discount
A good student discount is on the assumption that good students tend to be better drivers. In order to qualify, the individual has to be enrolled in high school or college on a full-time basis while also meeting certain other criteria such as being in the top 20% of the class or on the Dean’s List/Honor Roll, and having B average grades or above or at least a 3.0 average GPA.
Number and Type of Automobiles
Multicar discounts are generally available for those who own more than one automobile. The age, type, damageability, and repairability of the automobiles are important elements in determining the premium.
Drivers who do not have any at-fault accidents or driving violations for three consecutive years will often qualify for lower premiums. Insurers will require a dollar premium or surcharge if they either have at-fault accidents or driving violations within the past three years.
With some insurance companies, a good credit score can help drivers qualify for a lower premium. On the other hand, poor credit can lead to higher premiums with other insurance companies. Even more so, extremely bad credit can cause drivers to be denied coverage.
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Shop Around for the Best Auto Insurance Rates
There are many factors that go into setting your auto insurance premium rates. However, they can vary drastically from one insurance company to the next, so be sure to do your research. Many companies allow you to request a quote online so it is easy to compare. Overall, you want to purchase the most coverage for the best value so that you are always protected. However, you’ll still want to make sure your coverage limits are suitable for your situation.