When you drive a car, you will need to buy driving insurance so that you will have a way to pay for the costs of any accidents that you may have while you are behind the wheel.
You can get different kinds of insurance coverage. Some policies pay for repairing or replacing your car. Others cover medical expenses, car rental costs, towing fees, court costs, and other expenses.
In order to understand what kind of car insurance policy you have, you should always read the first page of your policy, which is called the declarations page. This page will list the name of your insurance company and your policy number, along with amount of each of your coverages and any deductibles that may apply. You should pay special attention to the exclusions section which will list the things that aren’t covered by your policy.
It is important to keep in mind that your insurance policy is a legal contract that can have a significant impact on your finances and well-being if you are ever involved in an accident. Be sure to read it carefully and ask your insurance company’s representative about any questions that you may have.
In addition to your policy, your driving insurance company will also send you a proof-of-insurance card which you should keep with you in your vehicle. There are times when you will be asked to show this card to prove that you are insured. Typical examples include whenever:
- A police officer asks to see it
- You are involved in an accident
- You register or renew your car’s registration
- You have your car inspected.
- You apply for a drivers’ license.
Types of Driving Insurance
In most states there are 8 main types of driving insurance that you can purchase. Usually you are legally required to have some of these policies, and there are minimum coverage amounts that you must meet. You should always check with a reputable insurance agent to find out what the driving insurance laws are in your area and make sure that your insurance policy meets the specific legal requirements that apply to you.
1. Liability Coverage
What it pays for: Injuries to people in another car who were hurt because of an accident that was caused by you, or by someone else who is covered by your policy. Specifically, liability insurance pays for:
- Wages lost because of the accident
- Medical bills arising from the accident
- Funeral costs
- Compensation for pain and suffering
- Costs to repair the other driver’s car or even replace it if necessary
- Car rental fees while the other driver’s car is being repaired
- Your attorney fees if you are sued because of the accident.
- Punitive damages awarded against you in court if you are involved in a lawsuit
- And if you are arrested following an accident, liability insurance can pay for bail.
However, it is very important to remember that your driving insurance policy has specific dollar limits as to how much it will pay for any accident. If the accident costs go higher than those limits, you may need to pay them yourself. These out-of-pocket expenses can quickly add up to tens of thousands of dollars or more if someone was seriously injured in the accident. Therefore it is very important to review your insurance policy each year and make sure that you have an adequate amount of coverage. Your insurance agent can help advise you as to the recommended levels of coverage given your personal circumstances.
Who is covered by your Liability Insurance Policy:
Generally this policy will cover you and your family members who live with you such as your spouse, children, in-laws, adopted children. Usually even wards and foster children are included in the policy.
However, some policies won’t cover other people, including family members, unless they’re specifically named in the policy. You should read your policy’s declarations page which will list the names of all of the people who are covered by the policy to be sure that it is accurate. And if your family’s situation changes and someone needs to be added to or removed from the list of covered individuals, contact your insurance company immediately to make the necessary changes.
- Other people who are driving your car with your permission are also covered.
- And members of your family who are not living in your home because they are attending school are usually covered.
- You and your family members might be covered when you are driving someone else’s car with their permission, or when you are driving a rental car. However you should read your policy carefully to determine exactly how these situations are handled by your policy. And always contact your driving insurance agent if you have any questions about whether or not you are covered under these circumstances.
2. Collision Coverage or Car Damage Coverage
What it pays for: This is the insurance you use to pay for the cost of fixing or buying a replacement for your own car after an accident. If you have a car loan, the lender will require you to have this insurance. It is important to remember that if your car is destroyed and needs to be replaced, you won’t receive enough money to buy a new car. Instead, you will only receive what your car was worth before the accident, minus whatever your policy’s deductible is.
Who is covered by your Collision Insurance: This insurance covers you, your family members, passengers in your car, and others driving your car with your permission. As always, check the declarations page of your insurance policy for specific details of who is covered.
3. Comprehensive Coverage or Non-Collision Damage Insurance.
What it pays for: This insurance will pay for the cost of replacing or repairing your car if it is damaged by fire, hail, vandalism, or any other event except a collision. It will also pay to replace your car if it is stolen, as long as you report the theft to the police. Finally, comprehensive coverage will pay the costs of a rental car or other temporary means of transportation for you if your car is stolen.
However, like Collision Insurance, the amount that your driving insurance company will pay you is only your car’s actual cash value less your policy’s deductible. If you still owe money on your car, your lender will require you to have comprehensive coverage as well as collision coverage.
Who is covered by your Comprehensive Insurance: Like Collision Insurance, Comprehensive Insurance covers you, your family members, passengers in your car, and others driving your car with your permission. Your driving insurance policy’s declarations page will list the specific details about who is covered.
4. Medical Payments Coverage
What it pays for: This insurance will pay for medical bills for you, your family and other passengers in your car if you have an accident with another car, or with a pedestrian or bicyclist. Funeral expenses are also covered.
Who is covered by your Medical Payments Coverage: This insurance covers you along with your family members, and any passengers in your car. It doesn’t matter who caused the accident.
5. Personal Injury Protection (PIP) Coverage
What it pays for: This type of policy is very similar to medical payments coverage, except that it also pays for lost income and the cost of hiring a caregiver for an injured person.
Who is covered by your PIP Coverage: Like Medical Payments Coverage, this insurance pays for expenses incurred by yourself, your family members, and any passengers in your car, regardless of who caused the accident.
6. Coverage for Uninsured or Underinsured Motorists (UM/UIM)
What it pays for: Unfortunately some drivers do not have insurance coverage even though they are legally required to do so. And sometimes you may be in an accident where your injuries are so severe or the damage to your car is so extensive that the driver who caused the accident does not have enough Liability Insurance to pay all your bills. When this happens, your UM/UIM insurance can pay for your bodily injury and your property damage expenses, up to the limit specified in your policy. This insurance can also pay for expenses caused by a hit-and-run driver as long as you promptly report the accident to police.
Who is covered by your UM/UIM Policy: This insurance will pay for injuries and losses sustained by you, your family members, passengers in your car, and others who are driving your car with your permission.
7. Towing and Labor Coverage
What it pays for: This insurance is very easy to understand. It simply pays for towing charges when your car is not able to be driven because of an accident, damage or a breakdown. And it also pays for labor charges to get your vehicle operational again, such as changing a tire or jump-starting a dead battery.
8. Rental Reimbursement Coverage
What it pays for: This insurance will pay you a fixed fee every day to cover the costs of a rental car while your car is being repaired or if your car is stolen. However, this coverage will only apply if your car is being repaired because of an accident that was covered under your insurance policy. And if your rental car fee is more than the daily fee set by your insurance company, you will have to pay the difference.
Specialty Driving Insurance Policies
In addition to the main types of coverage, there are various other types of insurance policies that may be suitable for your specific needs.
Coverage for Personal Equipment
Your normal driving insurance policy won’t pay for personal items like compact disks or DVDs, radios, iPods or other music players, cell phones, and any after-market stereo or multi-media systems that you may have in your car. But you can purchase a separate policy to cover these items if they are damaged in an accident or stolen from your vehicle.
Rental Car Coverage
Rental car agencies always offer collision damage waivers and liability policies when you sign the rental agreement. It is very important to realize that a collision damage waiver isn’t a proper insurance policy, but a contract that states that if you damage the rental car in any way, the rental company won’t bill you for the cost of repairs.
In many cases your own driving insurance policy may already cover any vehicle damage you might cause while you are driving a rented car. However, even if this is the case, you need to be aware of your coverage limit in case it is so low that it would not cover the value of repairing or replacing the rental car. Always read your policy carefully before renting a vehicle to know your policy will cover and you’re your coverage limits are. You can always call your insurance company to increase your coverage limits if they are too low to ensure that you have sufficient coverage.
If you frequently borrow or rent cars because you don’t own your own vehicle, you may want to buy a non-owner liability policy, which is basically driving insurance without a car. Like a normal liability policy, a non-owner policy will cover costs for injuries or damages that you cause to others or their vehicles when you are driving a car that you don’t own. However, this policy will not pay for any damage to the borrowed or rented vehicle and it will not pay for any medical costs related to your personal injuries.
Coverage for a New Car
When you purchase a new car or add another car to your policy, you might find that your driving insurance policy automatically covers it. So before you make a purchase, be sure to read your policy or ask your insurance agent to find out if your policy includes this coverage.
However, it is important to realize that insurance companies usually review your policy and give any new car the maximum amount of coverage that your current car has. So if you already have a car with liability, collision, and comprehensive coverage, any new car you buy will automatically have liability, collision, and comprehensive coverage, too.
Similarly, a replacement car will usually have the same coverage as the car it replaced. So if you replace an older car that only had liability coverage, the new car will automatically have only liability coverage as well.
This means that in order to be sure that any new or replacement car has the right kinds of coverage, you need to talk to your insurance agent or insurance company and specifically tell them which types of coverage you want. Usually your policy will have a set number of days after your new car purchase for you to make these policy changes. You need to be aware of this deadline and be sure to make any insurance coverage changes within that time from so that you get the coverage that’s right for you.
Understanding Driving Insurance Costs
Insurance companies use a complex set of rules to decide whether they will sell you an insurance policy and, if so, what rate to charge you. Typical questions that insurance companies will ask you to decide on your insurability status and the amount that they will charge you for driving insurance coverage include:
- How old are you, and are you married or not? Male drivers less than 25 year old and unmarried women under age 21 pay the highest rates. On the other hand, older drivers age 50 or more may get discounts.
- Do you have a good driving record and have you ever made any claims in the past? Needless to say, a good driving record can save you money. And if you have had many accidents and claims in the past, you might need to buy expensive high risk driving insurance.
- Where do you keep your car? If you live in a city where there are more accidents and auto thefts, you will probably pay more than someone who lives in a suburban or rural area.
- What type of car do you drive? High performance sports cars and luxury sedans look beautiful, but that beauty comes with high collision and comprehensive insurance rates. And car models that are known to damage easily or be difficult to repair typically have high premiums as well
- How do you use your car? If you use your car for business you might need to buy commercial driving insurance. And even if you just to commute to work, you will pay more in driving insurance premiums than if you simply use it for your own enjoyment.
- What is your credit score? Some companies will use your credit score to decide if they want to sell you a policy and what they’ll charge.
How to Find the Best Rates for Driving Insurance
Even though all insurance companies ask similar questions to determine whether they will insure you are not, once you start getting driving insurance quotes you will find that there is a lot of variation in insurance costs between different companies. That means a savvy shopper can save hundreds of dollars per year simply by shopping around. Here are some useful tips to help you find the best deal when you’re looking to buy cheap driving insurance:
- Always decide which types of coverage you need before you start looking for insurance.
- If you financial situation allows, save money by selecting a higher deductible on your driving insurance policies. On the good side, a higher deductible will lower your insurance policy premium. However, you will have to pay more out of your own pocket if you ever have a claim, so be sure to keep the deductible at a reasonable amount relative to your income and savings.
- Always get price quotes from several companies so you can do a comparison. But be sure that the quotes are for exactly the same coverages so you can do find the best deal.
- Whenever you are looking for a price quote or filling out a driving insurance policy application, you must always answer all questions truthfully. You can’t get an accurate price quote if you give incorrect information. And even worse, falsifying your answers could mean that your application is denied, or that your policy is later cancelled when the errors are found out.
- Be sure that you are buying from a reputable driving insurance company and only deal with licensed companies and agents. Cheap insurance doesn’t seem so cheap if you can’t ever get in contact with the company when you have a claim. And unscrupulous agents can sell you a policy that doesn’t truly meet your needs, leaving you unprotected when you least expect it.
- Finally, remember to always ask your agent about any special discounts that might apply to you. These days there are so many discounts available that you may be pleasantly surprised to find that your insurance policy won’t make quite as big a dent in your budget as you had expected. Here are some typical discounts that you or family members on your policy might be eligible for:
- Save money if you and other insured family members complete approved defensive driving courses.
- Driving insurance for young drivers can be very expensive. Having your teenager complete a driver education course could save you money on teen driving insurance.
- Students with good grades may be also able to save money on teenage driving insurance rates.
- Do you have a young driver who is away at college and doesn’t have a car with them? If so, you may be able to save money on your policy during the school year.
- Have 2 or more cars? Insure them on the same policy.
- And maybe you can bundle your driving insurance with a homeowner’s insurance policy or other coverage to save money.
- You might also qualify for a discount if your car has safety features like airbags, automatic seatbelts, automatic daytime running lights, antilock brakes, and antitheft devices.
- Do you belong to a club, group or organization like AARP that has negotiated discounts for its members? Some large corporations also have special insurance rates available to their employees so check with your Benefits or Human Resources Department to see if you might be eligible.
Buying insurance coverage can certainly be a complicated process. But as long as you understand exactly what types of insurance coverage you need, deal with a reputable agent and shop around to get the best deals, you should be able to find the driving insurance coverage you need at a price that you really can afford.