Shopping for auto insurance is certainly not the easiest thing in this world. Most of us will probably never fully understand what is behind the online quote and what is actually included in the insurance.
Being familiar with auto insurance terminology can, however, help.
Your auto insurance policy is often a package of seven primary coverages. Each has its own separate premium amount.
The seven basic coverages are:
- Bodily injury liability (if you injure or kill someone while driving).
- Medical payments, no-fault or personal injury protection coverage (pays for the medical expenses of the injured driver and passengers in your car).
- Uninsured motorists coverage (if an uninsured driver, or hit-and-run driver, injures you).
- Comprehensive physical damage (if your car if it is stolen or damages are not the result of a collision).
- Collision coverage (if damages are the result of a collision).
- Property damage liability (if your car damages property).
- Rental reimbursement coverage (if you need to rent a vehicle after a collision).
You also have the option to add other coverages like emergency road assistance.
The next thing to understand is your deductible.
This is the amount you must pay out of your own pocket before your insurance kicks in. A $1,000 deductible means you pay the first $1,000 on a claim that is, for example, $3,000. The insurance company pays the remaining $2,000.
A low deductible means higher premiums. Or in other words, one way to lower your premiums is to raise your deductible.
You should always select a deductible that you know you can pay out of pocket at all times.
Decoding your online quote means you should carefully examine the amount of coverage you actually need. For older cars you may want to consider dropping Collision and Comprehensive Coverage. Your insurance company will normally limited coverage to the cash value of your car.
When comparing different quotes, you should also make sure you look at the same coverage. This is not always as straight forward as it might sound. Different companies have different ways of presenting the insurance.