Car insurance…where do I even begin? Two years ago, after going to several car dealers, I finally found the perfect car for me. But before I could drive it, I had to get it registered and insured. The problem was that I didn’t know much about car insurance, other than it protects you from paying a lot of money out-of-pocket if you get into an accident. Plus, all those big words about insurance left me scratching my head in confusion. I bet a lot of you feel the same way, so here is what I learned about the basics of car insurance.
First of all, there are many different car insurance companies that offer different levels of car insurance. Your first step is to shop around and find out the details about different car insurance plans, called policies. Car insurance offers property, liability and medical protections. This means that the company pays for the damage, theft, legal responsibility and medical cost if anything happens to your car or someone else’s car while you are driving.
You might be thinking at this point, “I don’t need car insurance because I’m a safe driver and never get into accidents.” Well, the thing about car accidents is that you can never predict when one will happen. Also, all 50 states have some kind of requirement that says you have to show insurance and/or financial responsibility should you cause or be involved in a car accident.
But beware; the insurance company is not always going to pay for everything if you get into an accident. This is where deductibles come into play. I know, there is another one of those words! You are probably wondering, “What’s a deductible?” Simply put, it’s the money you have to pay out-of-pocket for some of the damages caused during an accident before the insurance company pays for the rest. The higher your deductible the lower your insurance premium (the more money you pay out-of-pocket, the less money you have to pay for coverage). If this is still confusing let’s think of it this way: the premium is the amount of money you pay (generally monthly, twice a year or yearly, but it depends on your plan) to have car insurance, but the deductible is a fee you personally pay each time you get into an accident. If you’re willing to pay more out-of-pocket each time you get into an accident (a larger deductible) then the amount you pay to have insurance is lower (the premium).
Buying car insurance really depends on your needs and state requirements for the minimum coverage you are required to have. You do not want to get minimum coverage insurance if you have a really expensive car and you will want it replaced if a collision were to happen. So make sure you get the right coverage for your car before you drive it, and do not let big terms throw you for a loop. To prepare you for the next article in the Huh?! Car Insurance series, brainstorm ways that could help you possibly save money on car insurance.