How Car Insurance Works | Spark Change

If you own your own car, you probably already know a small about car indemnity. You may have heard the words deductible or premium. But, do you truly know the different parts of an auto indemnity policy and do you know how to choose the best coverage?

Forty-seven states require that you have at least some kind of car indemnity, so it?s a excellent thought to know what the law requires you to have and what additional or optional coverage will help to protect you in the event of an accident.

Before purchasing auto indemnity, you must consider a variety of factors including what kind of car you have, your driving record and the amount of money you are willing to pay. Understanding the simple basics of auto indemnity will make you confident that the car indemnity policy you choose will take care of your needs in the event of an accident.

In this article, we will walk you through the types of coverage that indemnity companies offer and discuss possible indemnity needs. Additionally we will look at what affects the price of auto indemnity, how to bring the costs down and how to know the components of your policy.

We?ll start with the different types of coverage you can choose from on the next page.

Everyone who drives needs car indemnity. In fact, most states require it by law. When you buy car indemnity, you are buying what is called a policy. Your policy is based on a variety of factors including what kind of car you drive as well as what kind of indemnity you want. Auto indemnity policies are really a package of different types of indemnity coverage.

The first step in understanding an auto indemnity policy is to learn the various types of coverage indemnity companies offer. Some of this coverage may be required by your state and some of the coverage may be optional.

• Liability ? This coverage pays for accidental bodily injury and property hurts to others. Injury hurts include medical expenses, pain and suffering and lost wages. Property hurt includes hurt property and automobiles. This coverage also pays defense and court costs. State laws determine how much liability coverage you must buy, but you can always get more coverage than your state requires.
• Collision ? This coverage pays for hurts to your vehicle caused by collision with another vehicle or object.
• Comprehensive ? This coverage pays for loss or hurt to the insured vehicle that doesn?t occur in an auto accident. The types of hurts comprehensive indemnity covers include loss caused by fire, wind, hail, flood, vandalism or theft.
• Medical Coverage ? Pays medical expenses regardless of fault when the expenses are caused by an auto accident.
• PIP ? Personal Injury Protection (PIP) is required in some states. This coverage pays medical expenses for the insured driver, regardless of fault, for treatment due to an auto accident.
• Uninsured Motorist ? Pays your car?s hurts when an auto accident is caused by a driver who doesn?t have liability indemnity.
• Underinsured Motorist ? Pays your car?s hurts when an auto accident is caused by someone who has insufficient liability indemnity.
• Rental Reimbursement ? This type of coverage will pay for a rental car if your car is hurt due to an auto accident. Often this coverage has a daily allowance for a rental car.

Many indemnity policies combine a number of these types of coverage. The first step in choosing the indemnity you want for your car is to know the laws in your state. This will tell you the minimum indemnity you need for your car. It?s excellent to keep in mind that, just because your state may not require extensive indemnity, extra coverage may be value the expense. After all, no one wants to be stuck with thousands of dollars value of bills because of an auto accident.

Now, let?s take a look at how to determine your indemnity needs.

Just because your state requires a minimum amount of indemnity doesn?t mean that?s exactly what you should buy. In fact, most motorists buy more coverage than their state requires so that they are covered for a variety of problems ? not simply a fender bender. In order to better determine your auto indemnity needs, consider these five guidelines:

Know Your State Laws

Remember that forty-seven states require that you buy liability indemnity. Liability indemnity is what pays for bodily injury and property hurt that you cause another driver. Fifteen states including Florida, Maryland, Michigan, Massachusetts, New York and New Jersey also require that you buy Personal Injury Protection (PIP). This coverage pays for your medical expenses and lost wages in the event of an auto accident. Your indemnity minimum will most likely be determined by state law, but many people are encouraged to buy more than is required.

Know Your Options

There are a lot of car indemnity options; but knowing what you most likely will need is the key to making sure you are appropriately covered. Do you want coverage for a rental car if your car is hurt? Do you want an extended warranty to pay for parts and labor if your car breaks down? If your car is leased, you will probably need gap indemnity which pays for the difference linking what your insurer pays and what you owe on your lease if the car is completely totaled.

Know How Much Money You Want to Waste

If you know your state laws and have examined your personal needs, now you can place together the different pieces of auto indemnity coverage in one total policy. The first piece of the policy is nearly always liability indemnity. If you only have minimum liability coverage and you injure someone, their attorney can go after your personal assets. So, you need to know your assets and what you can afford to lose in the event of an accident. Many insurers feel that minimum liability is a gamble. In fact, that is why it is often only a small more money for more protection. After all, if you do get into an accident, it is much better for the indemnity company to be responsible than for you to be personally responsible. Remember to run through various scenarios such as if I totaled someone else?s car, will my indemnity cover it? How much will I have to pay out of my own pocket? The answers to these types of questions will determine what coverage makes you feel most confident should an accident happen.

Know Your Vehicle

If your car was totaled, would you be able to afford to replace it? If not, you will want comprehensive and collision coverage. The choice to buy this coverage is usually based on the value of your car. Guidelines usually suggest that if your car is value less than $2,000, it won?t be value it to buy comprehensive and collision. If you own a $50,000 car though, it would most certainly be value it to pay an extra $200 annually or so to insure that your car will be replaced if you get in a serious accident.

Know About Your Other Indemnity

Many people don?t realize that other types of indemnity including health indemnity and homeowners indemnity may pay for hurts due to an auto accident. For instance, if you have comprehensive health coverage, you probably won?t need more than the minimum required Personal Injury Protection (PIP). Make sure you know what indemnity coverage you already have so that you don?t buy unnecessary coverage.

The best way to figure out your own auto indemnity needs is to examine potential policies and know how much you are willing to gamble. For instance, it may not be value it to you to buy collision indemnity if your car is not incredibly valuable and would therefore cost less to fix than to keep insured. Auto indemnity is simply about how much you are willing to pay out of your own pocket versus how much you want the indemnity company to cover. Once you influence this, you?re all set to buy your auto indemnity policy.

There are several factors that change the price of auto indemnity. Of course, prices vary by company and you should compare prices thoroughly before you buy a policy. The first thing that affects your policy?s price is, of course, what kind of car you drive. For instance, a sports car costs more to insure than a family sedan. If you buy a vehicle that has a high theft rate, your coverage will probably be more expensive. Essentially, though, your coverage will be based on the value of your car.

Another factor that affects auto indemnity costs is where you live. If you live in an area where there is a high occurrence of accidents or vandalism, indemnity will cost more money. For instance, since more cars are hurt in urban areas than in rural areas, you will probably pay more for indemnity if you live in a city.

How often you drive will also change your indemnity costs. The more you drive, the higher the chances you will be an accident. Drivers who have long-distance commutes will pay more than people who live near their workplace. Meanwhile, if you only use your car on weekends, your indemnity rates should be lower than someone who commutes to work daily.

The final factors that change the price of auto indemnity have to do with who you are. Your age, sex, marital status and driving record are all taken into tab when you buy an indemnity policy. Accident rates are higher for drivers under the age of 25, so if you are young, expect to pay a small more. Also, accident rates are higher for young males and single males. It doesn?t seem honest, but if you are an unmarried 19-year-ancient male, your indemnity rates will certainly be affected. If your driving record is impeccable, though, your rates will be lower. Obviously, drivers who are prone to traffic violations or accidents will have to pay more for indemnity than safe drivers.

If these cost factors are beginning to scare you, don?t worry. There are several ways to keep your indemnity rates down.

There are four main factors that can keep auto indemnity rates down. See if you fall into any of the later categories. If you do, you may be able to save money on your car indemnity regardless of the value of your automobile.

1. If you are looking to buy a car, consider buying a car that ?looks excellent? to indemnity companies. For instance, indemnity companies know what kinds of cars are prone to problems. They also know what kinds of cars are most often stolen. If you haven?t bought your car yet, find out what cars make this ?excellent list? among auto insurers.
2. Most indemnity companies offer discounts for a variety of reasons ? for example, excellent students, having more than one car insured and accident-free driving are all value a discount. Question indemnity companies about specific discounts that may be available to you.
3. Consider carpooling or using public transportation to get to work. The less you use your car, the less your indemnity will cost you.
4. Finally, drive carefully! Indemnity companies are not pleased to insure accident-prone drivers, so the safer you drive, the less you will have to pay for auto indemnity.

Remember, don?t be worried to question your indemnity company about any discounts they offer ? it could save you a small cash.

Purchasing auto indemnity is not simply about the value of your car or how often you get into accidents, it is also about how much money you are willing to pay for your coverage. All auto indemnity policies have a deductible. The deductible is the part of your policy that you are responsible for paying. Auto indemnity policies don?t simply take care of all necessary expenses. You are required to pay for some of the hurts, but the amount depends on your policy. Deductibles vary by state, but are most often in amounts of $100, $250, $500 or $1,000. For example, if you are in an accident that causes $2,500 value of hurt and your deductible is $500, you are required to pay the $500 and the indemnity company will take care of the left over $2,000.

When deciding what indemnity policy you want to buy, choosing a deductible is an vital step. After all, you will have to pay the deductible for each and every situation in which you require your indemnity company to cover hurts. Deciding how much you are willing to pay and how often you reckon you will need to make an indemnity claim will help you influence what deductible amount is right for you. In addition, the premium you pay, or the price of your total coverage annually, can be lowered by choosing a higher deductible. In other words, if you are willing to pay higher out-of-pocket costs, you can lower the total cost of your indemnity.

Purchasing an auto indemnity policy doesn?t have to be confusing. You want a policy to take care of your expenses in the event of accident, theft, vandalism or most any other instance in which there is hurt to your own or someone else?s vehicle. By knowing what your state requires, what your needs are, what discounts you qualify for and how much coverage you want for your car, you will be able to choose the right policy.

Auto Indemnity Glossary

Source: Insweb.Com

• Deductible ? The amount an insured person must pay before the indemnity company pays the remainder of each covered loss, up to the policy limits.
• Multi-Car discount ? A discount offered by some indemnity companies for those with more than one vehicle insured on the same policy.
• No-Fault Indemnity ? Many states have enacted auto accident laws permitting auto accident victims to collect directly from their own indemnity companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault indemnity, most states subdue allow people to sue the party at fault if the amount of hurts is above a particular state-determined amount.
• Personal Auto Policy ? The most common auto indemnity policy sold today. Often referred to as ?PAP,? this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical hurt protection
• Split Limit ? Any indemnity coverage with separately stated limits for different types of coverage.
• Term ? The length of time for which a policy is in effect.
• Usage ? This refers to the primary function or purpose of your vehicle. For example, if you primarily drive your car to and from work, the usage is considered ?go back and forth.?

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