Car Insurance Policy For Dummies

By James Tam on August 5th, 2007

A car insurance policy is one of the most important aspects associated with cars, and their safety. This is the major reason why most, if not all, states require at least some kind of policy. Apart from protecting the vehicle, and its riders, it also saves your hard earned money if you happen to get stuck in a legal mess after a nasty accident.

Hence car insurance is very important for both life, and property. With so many different forms of insurance, and so many insurance companies, you should have some basic knowledge as to what a particular type of insurance covers. This also makes it easy to shop as you can directly compare between offers made by different companies.

Insurance premium is an amount that you pay your insurance company at regular intervals. This amount is arrived at by grouping various kinds of coverage. The amount of this premium to be paid is calculated by arriving at your risk factor.

There are various conditions that are considered to determine whether you pose a higher risk, or a lower risk, and your premium is set accordingly. Usually teens are charged more premium than adults. However, adults who have poor credit history are also charged a higher premium.

Opting for higher deductibles can reduce the amount of your insurance premium. Deductible is the amount that the company charges you for every claim that you make. However, it is strongly recommended to shop around before deciding on a company and committing, as there can be a significant difference in rates between different companies, even for similar policies.

Liability insurance comes into picture when you are the cause of damage to other vehicles, or personal property. The insurance company pays the person whose property is damaged, on your behalf. The amount covered will depend upon the level of liability you carry with the policy. In case of free and clear title of your vehicle, you may be only required to opt for liability insurance by law.

Comprehensive coverage covers the damage done to your vehicle for no apparent fault of yours. This could be damage caused buy natural phenomenon like a hailstorm, or maybe public vandalism, or even a windshield broken by a stray baseball.

Collision coverage covers for the repair or replacement of your vehicle (as the case may be) after an accident. This insurance covers the car, as well as the driver. There may be many other benefits bundled with this coverage. For example, some companies cover the guarantee for the repair work if you carry it out with a shop that they have a tie up with. This saves the company some money, and you benefit by the quality of the job.

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