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Auto Insurance Glossary Terms
According to the results of an online study, the average car insurance rates in 2008 rose and are expected to rise again in 2009. At the low end of the car insurance rate scale, the average car insurance premium rose 1% over the first quarter of the year. The average car insurance cost was $1,830 per year. Back in 2007, average car insurance rates held stable or decreased during the year. The rate that drivers pay for their car insurance varies by state, insurance company and policy limits. In some parts of the United States, the average increase was quite sharp. For example, the cost of getting insurance coverage in Florida increased an average of 6.7% in the first quarter of 2008. Ohio drivers also had to dig deeper to pay for car insurance coverage; in that state, the average cost to insure a vehicle went up 4.7 %.
Car insurance companies estimate general averages for pricing purposes, based on a number of data points that include your age, gender, group affiliation, driving history, model of car etc. These factors are studied by the car insurance companies to determine the risk and cost of insuring individuals, and forecast the cost of paying for accident claims. On average, it costs more to insure males under the age of 25, because recent history shows more accident insurance claims in this category. On average, car insurance company data show that those who are married and older are more responsible with their car and less of an insurance risk. On average, if you live in the city and drive to and from work, using your vehicle more often in congested areas, there is a greater chance that you will get into a car accident. On average, if you drive a two door sports car as opposed to a family car, it's likely that you will be seen as a higher risk for an accident.
The above mentioned factors can really increase or decrease the rates or premiums that you will have to pay for car insurance. However, each company rates and weighs these factors differently in terms of your cost. Most drivers who use our free car insurance quote form find that they are paying too much. Look around at our average car insurance statistics for your city and state, and get your free car insurance quotes online. Compare quotes and get the best price and best car insurance coverage individualized for your needs. Bodily Injury and Liability - This mandatory coverage protects you in the event you cause a crash that injures someone. It also covers your legal defense if needed. Bodily Injury and Liability is made up of two amounts (eg: 100,000 / 500,000). The first limits the amount of medical payments to a single person per incident, while the second puts a cap on the total amount paid out to all injured persons per occurrence. I recommend the most coverage you can afford.
If your vehicle is in the shop for repairs resulting from an insurance claim, this coverage generally pays $15 per day for a rental car for up to 30 days. Good luck finding a rental car for $15 a day. Most sub-compacts start at $25 per day, with luxury models priced at $50 or more. In addition, severely damaged vehicles are almost never repaired in the first 30 days. I've sometimes had to wait weeks just to get a customer's car looked at by their insurance adjuster. Get the highest limits available; they only add a few dollars to most policies. They pay for themselves if your car is severely damaged and off the road longer than a month.
Collision coverage pays for physical damage to your vehicle caused by a collision. If you're judged to be at fault, this coverage pays to fix your car. If your vehicle is worth more than $4000, I urge you to get this coverage. Get a policy with a $250 deductible or less, if possible.
This covers fire, theft, and damage from acts of God like ice storms, tornados, hail, and floods. It also covers you if your vehicle hits a deer or is vandalized. Another highly recommended coverage (get the $250 deductible) if your vehicle is worth $4000 or more.
Popular with dealers, unpopular with me. Pays off your auto loan should you die or become permanently disabled. Premiums range from $10 to $40 per month. I cannot recall a single instance of any customer using this coverage, and you can't be forced to buy it. If your impending death or disability worries you, check your coverage under life insurance or disability policies you already have. If you need it, your insurance agent can probably add it to your existing policy for a fraction of what the dealer would charge.
Comprehensive covers your windshield, because it's against the law to drive with a broken windshield in most states. But for the rest of your windows, you still have to pay your comprehensive deductible before they'll pay for any broken glass. Get this inexpensive (sometimes free) coverage, especially if you spend a lot of time at the mall or live and work in a relatively high-crime area.
Gap Insurance (Leasing Only)
Gap insurance covers situations such as the theft or totaling of the car, when you end up owing more on the lease than the car is worth. Standard insurance will pay up to the car's current value, perhaps even the replacement value. But if you owe more than that, you still have to pay the difference. Gap insurance will do this for you.
This mandatory coverage takes effect if you are judged at fault in a collision. It pays to fix vehicles or stationary objects destroyed by your car. Get the most coverage you can afford.
In states without no-fault, this covers medical expenses for you and your passengers, no matter who was at fault in the crash. Get the most you can afford. (similar to PIP)
Although some states still don't have this beneficial insurance, No Fault is mandatory in most states. It pays medical expenses for you and your family, the passengers in your vehicle, and any pedestrians you may injure in an accident. The insurance is paid out regardless of who was at fault. (It does not cover property damage of any kind.) The medical benefits of a no-fault policy are sometimes called Personal Injury Protection.
If you travel to Canada or Mexico on a regular basis, make sure your automobile insurance coverage follows you. It may be necessary to take out country-specific policies if your carrier won't cover you. You especially don't want to get in an accident south of the border without a good policy. I consider this mandatory for anyone traveling in our friendly neighbors to the north and south.
Personal Injury Protection (PIP)
The medical portion of your no-fault insurance policy. Get the most you can afford.
Underinsured or Uninsured Motorist
Everyone should have this coverage, because it protects us from all the low-lifes who drive around with canceled policies. In most states you have to show proof of insurance to register a vehicle. Some people, however, take out a policy for registration purposes only, then let it get canceled by failing to send in their first installment payment. Luckily many states are cracking down on these criminals, by requiring insurance companies to notify the state when an automobile policy gets cancelled. The state's DMV then revokes the registration of the non-insured vehicle and notifies the registrant that the plates must be surrendered at once. If the plates are not turned in, the state suspends the owner's driver's license and revokes the vehicle's registration. In order to get the license back or re-register the vehicle, a hefty fine must be paid for each day the vehicle was driven without tags and insurance. An uninsured motorist caught driving with a suspended license in a car with a revoked registration goes to jail. If they hit your new car they still go to jail, but no one pays for the damage they caused unless you have Uninsured Motorist Coverage. Underinsured Motorist policies pay for injuries up to YOUR policy limit when the other driver either has no insurance, or their minimal coverage can't pay for your injuries or property damage. Hit-and-run accidents are usually included in this type of coverage, but make sure you're covered for them regardless. I consider this mandatory coverage, although most states don't. Get the most you can afford.
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