Auto Insurance Basics

Automobile insurance is probably the most important policy to have because vehicles represent the highest amount of risk the average person will face in his or her life. Having the right protection here is critical, so don't go for the cheapest coverage. Go with what's right for you.

Auto Insurance Basics Takeaway Information:

  • Cost of your policy
  • Policy Coverage

The cost of your policy will be based on:

  • Your age. Under 25 is the most expensive group. Aren't you glad you're older?
  • Where you live. The more crowded the area you live in, the higher your rates simply because congestion leads to more incidents.
  • Number of miles driven per year. The average car sees 12,000 miles a year. If yours gets less, you could save money.
  • Type of vehicle. Some vehicles may cost more to cover, even if they cost the same to buy. Sports cars top the list. But SUVs and luxury sedans may cost extra, too.
  • Age of vehicle. As cars age, they become worth less. Accordingly, the cost to insure goes down. Unless it's a collector's car.
  • Your driving record. Simply put, the better a driver you are, the less you may pay. Have tickets or accidents, though, and prepare to shell out.
  • Your credit history. A correlation has been found between financial risk and insurance risk. So keep your bills up to date to avoid paying extra.
  • Others on policy. If you're not the only driver, expect your rates to take into account everyone else's experience, record and miles driven, too.

Your policy should cover the following:

  • Liability. Covers property damage or physical injury to others caused by you. Consider more than the minimum to protect yourself in a lawsuit.
  • Collision. Pays for repairs to your vehicle. It's required by banks if you have a loan on your car, or lease it. Save money by choosing a larger deductible.
  • Comprehensive. Anything other than accidents, or excluded events is covered here: theft, fire, vandalism, flooding and hail, for example.
  • Uninsured and Underinsured Motorist. Fills in if the other party in the accident has too little, or no insurance, or leaves the scene.
  • Medical or Personal Injury Protection. Covers medical expenses no matter who's at fault. It may also extend to non-medical payments for lost wages, childcare and other important expenses.
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