With car insurance we are caught between a rock and a hard place. At the end of the day it’s an expensive annual cost, relative to the rest of the average costs we have to bear, that we hope we never have to use and work actively to avoid using. This never gives us a chance to see the value that car insurance is truly providing and leaves us feeling cheated. The truth is if your vehicle were to be stolen, vandalized, or damaged you could be at risk of a huge financial burden if faced with covering the costs on your own. So for those that have never been in an accident, you will probably continue to feel cheated, but for those that have dealt with this before, I bet they have no problem forking over the cash to the insurance companies.
Insurance companies have made getting insurance easier than ever, but getting the best rate possible requires that you understand the basic information. Your rate is largely affected by the value of your vehicle as well as any requirements from your state and your lender. The value of your vehicle depends largely on how new your vehicle is as well as the manufacturer. Parts for a 2017 BMW cost way more than a 1999 Hyundai and insurance companies compensate for that. Also different states require different coverage for car insurance. So New York might require bodily injury and property damage, but Connecticut might require bodily injury, property damage, and uninsured motorist coverage. Here is a breakdown of the basics.
A deductible is the amount of money you’ll have to pay out of pocket, following an accident, before your insurance kicks in. Why wouldn’t you get the policy with the lowest deductible possible right? Well, the monthly premium is the amount of money you pay every month to the insurance company. The lower your deductible the higher your monthly premium will be and on the flip side the higher your deductible than the lower your monthly premium will be. You might want to take out a policy with a lower monthly premium if you have money saved to pay a higher deductible in the case of an accident. This will save you money in the short term. If you can afford it and depending on the possibility of a crash then you might want to pay a higher premium. In this case of an accident your deductible is as low as possible. Sometimes this makes sense if you have multiple drivers on your insurance policy that might have an increased rate of crash. For instance, if you have other family members driving your car than you might want to hedge your bets and opt for higher premium payments and a lower deductible since you’re increasing your chances of accident and their actions are out of your control.
Watch out for part two of this article where we will talk about how much insurance you need, different types of car insurance, and how you can look for discounts.