If you own a car, you need auto insurance for two primary reasons: 1) to protect one of the most expensive things you own, and 2) to cover your legal and financial responsibilities for damages and injuries in the event of an accident.
Your car is a valuable possession. You rely on it every day. Insurance protects your car by providing a way of handling the expenses that result from an accident, vandalism, theft, fire, or other causes. In addition, auto insurance secures your financial responsibility to the lending institution while financing your automobile purchase.
Auto insurance is required by law. When you drive, you assume responsibility for the safety of your passengers, other drivers, pedestrians, other people’s property, and yourself. Insurance covers your liability for handling the costs associated with property damage and personal injuries to others and yourself.
Even though auto insurance is something you must purchase, there are ways to make sure that it doesn’t cost more than necessary. In fact, depending on your situation, you may even qualify for certain discounts.
Here’s an important reminder: Just because you have insurance, it doesn’t mean that you have adequate or proper coverage. Our Trust-Hall staff can evaluate your coverage, answer your questions, and help you make the best decisions about your auto insurance coverage.
Frequently asked questions about auto insurance
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What are the different types of auto coverage? Do I need all of them?
In general terms, there are six kinds of auto insurance coverage. Depending on your personal circumstances, you may not be required to carry all of them. Typically, however, if you are financing your car, the lending institution will require you to carry full coverage. The six kinds of auto coverage are:
General liability, which covers damage to other vehicles, property, and injuries to others, is generally the minimum kind of auto insurance required.
Collision, as the name implies, covers damage to your own vehicle resulting from a collision or accident. This kind of coverage is especially important if your auto is new.
Comprehensive covers a variety of damages not related to a collision — vandalism, theft, break-in, fire, and natural disasters. Depending on the age and value of your auto, you may want to regard this kind of coverage as optional.
Medical payments, often called personal injury protection (PIP), cover medical expenses for injuries to you, your passengers, or other parties, regardless of whom is at fault.
Uninsured motorist (UM) and underinsured motorist (UIM) protect you if you are injured in an accident caused by someone who carries no or insufficient liability insurance. Even though auto owners are required by law to carry auto insurance, many do not. In fact, in Colorado, as many as one-third of all drivers may be uninsured; thus, it is extremely important that you protect yourself from those who do not carry auto insurance.
Extra coverage, which may be optional, covers expenses for towing, rental cars, or certain repairs, and are generally regarded as add-ons or endorsements to your auto policy.
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Why is there such a wide variation in price for different drivers?
The price of an auto insurance policy depends on a number of risk factors. Drivers are categorized according to the level of risk they pose. Insurance companies determine the level of risk by keeping statistics about the amount of loss they experience among the drivers within a particular category. Drivers are categorized by:
Gender – Statistically, men have more accidents than women.
Age – Younger drivers, especially those under age 25, are considered a higher risk. Younger male drivers are especially considered a high risk.
Marital status – Drivers who are married tend to have fewer accidents than those who are single.
Driving record – Your personal driving history — traffic tickets and offenses, accidents, driving experience, etc. — are also used to determine your level of risk.
Vehicle use – How you use your car and the number of miles you drive is also factored into the amount you pay for auto insurance. For example, if your commute to work is only a few miles, you will likely pay less than someone whose commute is much longer. Also, people who use their car for business purposes tend to pay higher rates.
Vehicle type – The make, model, year, equipment, and value of your car, plus repairs, replacement costs, and other factors are taken into consideration.
While you cannot control your gender and age, you can control your driving record, vehicle use, and the type of vehicle you buy. Thus, to some extent, you can control the amount you pay for auto insurance.
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What’s that collision damage waiver that car rental companies want you to buy? Do I need really need it when I rent a car?
The collision damage waiver, which is a type of insurance that the rental car company tries to sell, releases you from financial responsibility should you damage their vehicle while renting it. If you have already have insurance on your own car (including collision and comprehensive coverage), and rent a car for pleasure only (e.g., when on vacation), you don’t need to buy the collision damage waiver from the rental company.
Renting a car for business purposes, however, is usually a bit different, and you should check with your insurance agent first.
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Does my auto insurance cover other people who drive my car?
Yes. Liability, collision, and comprehensive insurance follow your car. In addition, if the person who borrows your car is insured, his or her policy also will be available to cover the cost of damages and injuries should there be an accident. The same rules apply when you borrow someone else’s vehicle.
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On my insurance policy, what do those three numbers divided by slashes mean?
Each of these numbers means thousands of dollars in liability coverage. For example, the numbers 100/300/100 actually mean $100,000/$300,000/$100,000.
The first number is for bodily injury coverage per person; the second number is for bodily injury coverage per accident; and the third number is for property damage coverage per accident. Thus, in the above example, your coverage:
- $100,000 in bodily injury coverage per person.
- $300,000 in bodily injury coverage per accident.
- $100,000 in property damage coverage per accident.
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How can I keep the cost of my auto insurance as low as possible?
As with most everything else, you can shop around to find low cost auto insurance. But finding low cost auto insurance is no guarantee that you are getting the coverage you really need. There are many factors that go into determining the right coverage — and price — for your individual situation. While it can pay to shop around on your own, your shopping should also include the input and advice of an insurance agent.
In addition, there are a number of things that you can do that will enable you to get the right coverage at a lower cost. They are:
Maintain a good driving record. As pointed out earlier, maintaining a good driving record signifies that you are less of a risk than those who have a poor driving record. Your driving record is a significant factor. Simple infractions, such as a speeding ticket, can raise your rates for several years.
Take the highest deductible you can afford on collision and comprehensive coverage. The deductible is the amount of out-of-pocket expense you must pay before your insurance kicks in. For some people, the difference between $250 and $500 (common deductible amounts) is relatively insignificant, so by taking the higher deductible, premiums are lower.
Check for discounts. Many insurance companies offer discounts for such things as air bags, anti-lock brakes, alarm systems, multiple vehicles, auto and home insurance from the same company, etc. An independent agent makes it his or her business to know the options available from a variety of companies.
Pay your premiums on time. If your auto insurance is cancelled because you failed to pay your premiums, it could be difficult finding another company to insure you. Nonpayment of premiums is regarded as a failure to assume financial responsibility, which would make you a poor risk. Remember, if you can afford to own a car, you must insure it.
Factor in the cost of insurance when considering a particular vehicle. For a variety of reasons, some cars cost more to insure than others. If you are willing to consider alternatives to a particular car you’re thinking about buying, check with your insurance agent first for possible insurance savings.
Consider transportation alternatives. Driving a car is a very personal thing and is a concept that is ingrained into our way of life. But driving your car to work significantly increases the likelihood of being in an accident. Remember, the cost of auto insurance depends on many risk factors. Long rush-hour commutes not only increase the wear and tear on your vehicle and nerves, but also elevates your risk and the cost of insurance.
Consider dropping some coverage on older cars. If your car is older and relatively low in value, you might want to drop collision and comprehensive insurance. But before doing so, get the advice of an insurance agent to see if that’s a wise choice.
Periodically review your coverage. Situations and circumstances sometimes change and may require adjustments to your insurance coverages. There’s nothing to be gained by paying more than necessary.