Having a car can be costly. There are a lot of expenses related to car-ownership and you may want to look into reducing them. Read below to find out whether car insurance is something you really need and how you can save on it.
What is car insurance?
Car insurance is a coverage for damages incurred by yourself, as well as other people driving your car. These “damages” refer to any physical damage done to a third party’s vehicle, as well as death or injury. You could possibly even cover your own costs of repairs, having the car stolen, or written-off. Even though it is something you will hopefully never get a chance to actually use, it is worth having. This is something you only find out when you get into a situation which requires you to cover the damages.
Is it mandatory?
Car insurance is mandatory in most countries and states worldwide. Even those vehicles which are rarely or never used, have to be covered. If you own a car nobody uses, you should make it official and register it as off the road vehicle. Those jurisdictions which allow optional car insurance e.g. Virginia and New Hampshire, USA, have their own rules on handling this. Virginia, for example, requires an additional $500 fee toward the registration cost. On the other hand, New Hampshire lets you do the math and be responsible. If you get into an accident, your license gets suspended until you can prove you have covered for the damage incurred by the incident.
Types of car insurance
There are different types of insurance policies available for car insurance. Once you get to the point of registering your car, you will have to check what is available to you in your country. Also, each jurisdiction has a required minimum of insurance. Generally, the types of coverages include collision, bodily injury liability, property damage liability, medical payments and personal injury protection, and comprehensive coverage. They do not all come at the same price. Before you decide, speak to an agent and determine the best coverage for your car.
How much do I pay?
An insurance premium is not a fixed charged. It depends on many factors and it can vary from time to time. The first thing an insurance company looks at is the car. The advice of auto service on maintenance is to check your car regularly and keep it in excellent shape. Its overall shape, as well as the model, the cost of repairs, accessories and the rest of equipment, are taken into account. Furthermore, the premium is determined by the car’s purpose, where you live and where you park, your driving record, the experience and driving record of those also using your car, as well as the type of options you chose to include in the coverage. In many countries and states, the insurers will even request a credit score check.
What is a deductible?
A deductible is the amount of money you pay toward damages without tapping into the insurance payout. It is a down payment you are making for the damages. The insurance company will cover the rest. However, even though they are the ones giving the payout, you are the one paying installments for it through your premium. The larger the deductible, the smaller the premium. Think and select what you prefer. If in your case paying more in one go sounds better, you should do that, and keep your premium low.
Before buying a car
There are certain important things to bear in mind before buying a car, and in general, which can make this affair a lot cheaper. Make sure that spare parts for a car you intend to buy are generally cheap and easily obtainable. Also, if need be, invest in extra classes and become an excellent driver. A good driving record with no claims on the insurance policy will decrease the policy price and lower premium charges significantly over a period of 5 years. Maintain good credit score. Also, building a garage, or renting one could affect the premium. However, make sure your investment actually counts and you come up with a safe but cost-effective solution.
Look into discounts
When looking into insurance options, check whether one of the insurance companies offers discounts for certain groups. You can often get it if you are a retiree or if you have more than one vehicle insured in one policy. Also, if your car does not get used a lot, if you’ve taken high-performance driving lessons or defensive driving classes which should make you a safe driver. In addition, certain insurance companies reward students for their efforts and offer discounts for those with good grades.
Even if you live in a jurisdiction which does not require car insurance, look into obtaining one. It may prove to be more cost-effective. Also, if at some point in time you wish to get a loan using your car as a security, you will not be able to it with an uninsured vehicle.
The purpose of car insurance is to protect yourself and your family’s finances without giving a lot upfront or setting a separate emergency fund.