Car Insurance Tips in the USA

Car Insurance Tips in the USA

Car insurance rates for single males under the age of 25 are very expensive.

Insurance rates also depend upon the part of the city, town, or county you live in, what the local population is, and how many miles you drive annually. 

If you keep your cars in a garage, or if you have safety features like a security alarm or airbags, your insurance premiums may be lower.

Coverage Types

There are various types of coverages available:

  • Liability coverage: It is mandatory to have this coverage. If you hit another car, person or property, you would be legally liable to pay for the damages. Each state has the minimum coverage amount that you must buy. However, if the expenses are higher than the coverage amount, you would still be responsible to pay the balance. 

  • Collision coverage: If your car is damaged in an accident or you hit a pole or similar situation, this coverage would pay to get the car repaired. Collision repairs are usually very expensive as the labor is very expensive. If your car is worth some money, you should get this coverage. If you have a really old car that is very cheap, you may not want to pay for this coverage, if you don’t care about getting your car repaired.

  • Comprehensive coverage: If your car is damaged in situations other than collision, such as hail damage or a wide variety of other situations, this coverage would pay to get your car repaired. Most people that buy comprehensive coverage would also buy collision coverage.

Before the insurance company pays any amount, you would have to pay the deductible. The higher the deductible, the lower the insurance premiums become.

Uninsured/underinsured motorist coverage

When buying car insurance, make sure to get uninsured/underinsured motorist coverage. If some other car hits your car, and if it is the fault of the other party, that other party’s car liability insurance is supposed to pay for the damages to your car and also if you have added any bodily injuries. If the other party who is in fault does not have car insurance or doesn’t have enough car insurance, your insurance company will pay for your costs if you have uninsured/underinsured motorist coverage. Same insurance will help you when someone hits your car and runs away. However, keep in mind, in case your car insurance is paying your claim in such cases, it would be counted as a claim against your policy and your insurance premiums may go up in future, even if it was not your fault.

In many states, it is mandatory to get car insurance in order to register the cars. However, some people may get the insurance, register the car and then cancel the insurance.

Optional Coverages

In addition to the major coverages, there are other optional coverages worth mentioning:

  • Rental car coverage: If your car is damaged and it is getting repaired, you still need another car to travel. Of course, you can use a taxi or services such as Uber or Lyft. But, if you prefer, you can get a rental car for that duration. If you have purchased this optional coverage, the car insurance company would pay for rental car charges. Usually, there is a per day limit, the number of days limit, as well as an aggregate limit.

  • Road side assistance: If you have purchased this coverage, and if you need any road side assistance, such as changing the flat tire, or getting some gas because you ran out of it and there is no nearby gas station etc., the car insurance will pay for the same. However, it is generally not a good idea to get this from the car insurance company because some of them might count this as a claim and increase your car insurance premiums the next year. 

  • OEM coverage: If you buy a new car, you should really get this coverage. If your car is damaged and if some parts need to be replaced, the insurance company would normally not pay to get the original parts from the manufacturer of your car. They may only pay for the after market parts which they consider to be ‘comparable’ in quality, but in reality you may not want that. Of course, you have the right to get your car repaired anywhere you like, including the car dealership’s body shop. But you will have to pay the difference out of your pocket. If you have taken this coverage, they would need to pay for the original parts. 

  • Replacement coverage: If you buy a new car, this coverage is highly recommended. The value of the car depreciates the most in the first few days or first few months after it has been purchased. E.g., you have taken a new car that is worth $25,000, and paid 10% downpayment ($2,500) and taken a loan for the rest ($22,500). What if you get into an acccident two months after you purchased it and the car needs to be totalled? That means, the cost of the repair is higher than the current value of the car? If the insurance company determines that the current value of the car is only $20,000, they will pay just that. You still have $22,500 loan (minus one installment already paid). But overall, you would still be at the lose of $5,000. If you wanted to buy the same car again, you would have to come up with the extra $5,000. If you have purchased the replacement coverage, the insurance company will pay that extra $5,000. A related type of coverage is called a gap coverage, which would pay the amount of loan you have outstanding. However, you would still lose your down payment.

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