Auto insurance: a practical guide with everything you need to know
The practical information contained in this guide covers the importance of hiring auto insurance, the difference between coverage policies, and even suggestions on how to select the car insurance that best suits your pocket and your needs.
Having auto insurance means being responsible to yourself, your loved ones, and to the society in which we live. It’s more than complying with the law, it’s having the confidence that you are protected in the event of a car accident, whether caused by you or someone else.
Remember that if you drive, you must have auto insurance that meets the minimum coverage required by the law of the state where you live. Check out our guide, and meet with your insurance agent to help protect you and your property in the event of a car accident.
The importance of auto insurance
The consequences of driving without insurance pose too many risks and should not be ignored. These could include:
- Expensive traffic tickets;
- Loss of your driver’s license;
- Have your car seized or seized by the police; and,
- In case of an accident it could even cost you your freedom.
Plain and simple, if you drive you need auto insurance. Still, some people decide car insurance is too expensive, or think they might not qualify for it, but they don’t!
There are insurance agencies that offer auto insurance policies that:
- They stick to your pocket and your needs;
- They only ask for a photo ID and the data of the car to be insured.
Did you know that in 48 of the 50 states of the American Union it is a legal requirement to have car insurance to drive? But having auto insurance is more than complying with the law; means security, protection, and peace of mind for you and your loved ones.
What you should know: DON’T TAKE ANY RISKS. Auto insurance could offer security, protection and financial peace of mind in the event of an accident, to repair the vehicle or receive medical attention, either for you, those who travel in your vehicle, or for third parties in the event that you are responsible for the collision.
Insurance policies and their functions
The first step in understanding an auto insurance policy is learning about the coverage and protection each offers. Some of these policies may be required by law and some may be optional.
There are different types of auto insurance policies, and each one fulfills different functions. Below we describe two important categories of insurance policies:
1. Liability coverage policies
This type of insurance covers damages and injuries to other people and their property in the event of an accident caused by you (this is the type of insurance that is required by law in almost all states).
This coverage pays for bodily injury and/or property damage. Bodily injury includes medical bills and sometimes even lost wages. Property damage includes damage to vehicles and any property, such as accidentally hitting a home’s patio fence. This policy could also cover legal, judicial and court costs. State law determines the minimum liability coverage you must have, but it’s a good idea to get more coverage than the state requires.
2. Collision and injury coverage policies on your car
For damage to your car and injuries incurred by you or your passengers in the event of an accident. In our surveys we have found that this is often the main reason most of us want to have auto insurance.
Some examples of additional types of coverage you might include in your policy include:
- “Uninsured Driver”: Covers damage to your car in the event of a car accident caused by a driver who does not have liability insurance.
- “Underinsured Driver”: Covers damage to your car or bodily injury in the event of a car accident caused by a driver who has liability insurance that does not cover all expenses.
What you should know: The first step in selecting auto insurance is knowing the laws in your state. This will tell you what type of insurance you require or need to legally drive your car. However, it’s also good to keep in mind that it may be well worth protecting yourself with broader coverage, after all, no one wants to be in debt for thousands of dollars due to not having enough coverage in their insurance policy.
Minimum coverage per state
The vast majority of states require you to carry limited liability insurance (also known as third party coverage).
Surely when you meet with your insurance agent they will show you a series of numbers such as «20/40/10», and each one represents thousands of dollars:
1. 20/40/10: The first figure refers to the damage limit that the insurance will cover for bodily injury expenses per person.
2. 20/40/10: The second figure refers to the damage limit that the insurance will cover for bodily injury expenses per accident in the event that there is more than one injured person.
3. 20/40/10: The third figure refers to the damage limit that the insurance will cover for property damage.
So, 20/40/10 means having coverage of up to $20,000 per person injured in an accident, up to a maximum of $40,000 per accident, and up to a maximum of $10,000 of property damage coverage.
What is the minimum requirement in your state?
The law stipulates that the minimum coverage in the area of civil liability insurance must include «Damage to third parties in bodily injury» and «Property damage to third parties».
- Alaska 50/100/25
- Alabama 40/20/10
- Arkansas 25/50/15
- Arizona 15/30/10
- Calif. 15/30/5
- Colorado 50/25/15
- Connecticut 20/40/10
- Del. 15/30/5
- Florida 10/20/10
- Georgia 15/30/10
- hawaii 20/40/10
- ID 50/20/15
- Illinois 40/20/15
- Indiana 50/25/10
- Iowa 40/20/15
- Kansas 50/25/10
- Kentucky 25/50/10
- louisiana 10/20/10
- Maine 50/100/25
- Maryland 20/40/10
- Massachusetts 20/40/5
- Michigan 20/40/10
- Minnesota 60/30/10
- Mississippi 25/50/25
- Missouri 50/25/10
- Mountain 25/50/10
- Nebraska 25/50/25
- New Hampshire 25/50/25
- New Jersey 15/30/5
- New Mexico 25/50/10
- Nevada 15/30/10
- New York 25/50/10
- NC 30/60/25
- North Dakota 25/50/25
- Ohio 12.5/25/7.5
- Oklahoma 10/20/10
- Oregon 25/50/10
- Pennsylvania 15/30/5
- Rhode Island 25/50/25
- SC 15/30/10
- South Dakota 25/50/25
- Tennessee 50/25/10
- Texas 40/20/15
- Utah 65/25/15
- Virginia 25/50/20
- VT 50/25/10
- Washington 25/50/10
- Wisconsin 50/25/10
- West Virginia 40/20/10
- Wyoming 25/50/20
Many experts consider that having only a policy with the minimum of third party damages is very risky. Consider paying a little more for broader coverage that ensures better protection for you and your property.
Compare and select insurance
There are many types of auto insurance, but knowing what your state requires and what you will need to protect yourself is the answer to choosing the best insurance plan that will give you and your family the necessary protection.
Having the right coverage will help cover expenses that could arise in the event of a crash or even theft of your car, and help prevent large financial losses.
In addition to the coverage that your insurance policy may offer, it is also very important to understand the “deductible”:
- All insurance policies have a deductible. The deductible is part of your policy that you are responsible for paying. For example, if you have an accident that causes $2,500 in damage and your deductible is $500, you will have to pay $500 and the insurance will cover the rest.
- A higher deductible could result in cheaper premiums (monthly payments). Think, how much would you be willing to pay in case of an accident or theft of your car?
Tips for choosing your auto insurance
1. Know what suits you
To choose your auto insurance you must first know the laws of your state. There is no federal law that requires you to have auto insurance, each state has uniform laws. Therefore, the first step in finding the auto insurance policy that best suits your needs is to check the requirements of the state in which you live.
For example, the state of California requires that the policy cover the minimum liability for:
- $15,000 for injury/death to one person;
- $30,000 for injury/death to more than one person;
- $5,000 for property damage.
Also in that state, for example, there is the Low Cost Auto Insurance Program ( CLCA ), which aims to give income-eligible drivers a way to obtain auto insurance at a lower cost. Accesible price.
After understanding the state requirements, find out what’s best for you. Compare if collision insurance is better for you, which only covers damage to your car in cases of accidents, or comprehensive insurance that covers your car in cases that are not accidents, such as theft, floods, natural disasters, etc. . Both options cover the requirements required by the state, there is only a difference in fees.
2. Ask, compare and buy smart
One of the best ways to learn is by asking. When you’re looking for the policy that’s right for you, research the various insurance companies, policies, and discounts you can take advantage of. For example: When calculating your premium, some insurance companies take into consideration the geographic locations where you live and your driving record.
Ask family and friends about their policies and ask for recommendations. Also, when you meet with an insurance company, ask about the discounts they offer. There are discounts for being a good driver, for being a good student, if you have more than one car, among others.
3. Evaluate your options
Not all insurance is the same! If you feel you need a professional, independent opinion from any insurance company, consider consulting an outside agent. An agent can help you in the process of comparing auto insurance quotes and recommending an insurance company that fits your budget. If you decide to ask an independent agent for help, be sure to mention your previous research and the most important things you’re looking for in an insurance company.
What you should know: There are big and important differences between insurance policies, and when comparing them, it is important that you consider the coverage, reputation and service that each one offers you. You deserve auto insurance that offers you more than protection and security, so make sure that your insurance company gives you personal attention in your language, that they have a wide network of offices, claim centers and that they assist you in the place and time as necessary.
How to save on your insurance policy
There are several recommendations to lower the monthly cost of your auto insurance. Here are some of them:
- Insurance companies know which types of cars are most likely to have mechanical problems or which are stolen most often. If you haven’t bought your car yet, ask an insurance agent which cars appear on the “good list” of auto insurance.
- Most insurance companies offer discounts for different reasons. For example: To students with good grades; to people who have more than one car insured with the same company; to people with a good driving record and no accidents.
- Consider carpooling or taking public transportation to work. The less you use your car, the less you will pay for auto insurance since it will be considered lower risk.
- Last, but perhaps most important: drive carefully!
What you should know: Remember that by asking you learn! Ask your insurance company about any discounts they offer—this could save you a lot of money in no time.
Your insurance policy
Here are the main parts of your car insurance policy that you should always have in the glove compartment of your car:
1. Validity of the policy (Policy period): Usually they are for six months. As long as you pay on time, your coverage will remain active. Remember to keep a copy of your policy current.
2. Name of the vehicles and drivers in the policy: This list shows the vehicles covered by the policy and the insured drivers.
3. Total premium (Premium): Each car will be assigned an amount to insure it. The total premium is the amount of money an insurance company charges in exchange for providing coverage—it can be paid in one payment, or in multiple installments according to your contract.
4. Coverage: If you have more than one car on your policy, the coverage for each one will be shown separately.
5. Discounts: This section shows the discounts and credits that apply to your insurance policy.
What you need to know: Buying an auto insurance policy doesn’t have to be confusing. What you need is that your insurance offers you enough protection.
In case of an accident
While we hope that you never get into a car accident, we want to offer you some tips so you know what to do in the event of an accident. Keep this guide in your car to refer to this list in case of an accident:
1. Stay calm: This is the first step in protecting yourself, your passengers, and other drivers.
2. Ask if anyone is hurt: If so, immediately call 911 for an ambulance.
3. Take precautionary measures: Turn on your flashing lights, park your car where there is visibility, and turn off your car. This helps reduce potential dangers that could happen immediately after an accident.
4. Exchange personal information with the other driver: Make, model and year of the other car; license plate of the other car; name, address, driver’s license number, and name and insurance policy number of the other driver. If you wish, you can also wait until the police arrive to exchange this information.
5. Write down details of the accident on paper: Include the time, date and place of the accident; weather and road conditions; Speed limits; people and cars involved; and if it has occurred, also property damage and bodily harm related to the accident.
6. Cooperate with police or other authorities present: You have the right to be treated with dignity.
7. Report the accident to your insurance agent: They will offer you the steps to follow to start the claims process.
What you need to know: An accident can be very traumatic, by no means admit fault to the other driver or to the police without first talking to your attorney or insurance agent.
Glossary
Collision Coverage
Covers losses due to damage to the car when it collides with another vehicle or object. It does not cover expenses for injuries to third parties or damage to property.
Property Damage Coverage
Covers the repair or replacement of third party property damaged by the insured or another person included in the policy. It does not cover damage to the vehicle. Liability and property damage coverages, if combined, are called «liability insurance.»
Coverage against all risks (Comprehensive Insurance)
Covers damage caused to the automobile for any reason except for a crash: vandalism, fire, flood, falling objects, hurricane, collision with animals, broken glass, among others. Many policies call this type of coverage “other than collision” damage.
Liability Coverage
Covers the amount to be paid when a court declares the insured liable for damages caused to third parties. It also covers the defense fees of the insured in court.
Coverage for personal injuries (Personal Injury Protection-PIP)
They are the “no fault” benefits available in the states that contemplate this legal principle. Generally, it includes benefits for medical care expenses, accidental death or funeral, and lost wages.
Deductible (Deductible)
The part that corresponds to pay for the losses contemplated in the policy before the insurer pays the rest of the expenses.
Exclusions
The clauses of a policy that establish what is not covered by the coverage. You must be fully aware of the policy exclusions.
Premium
The amount you pay the insurer in exchange for coverage.
No-Fault Insurance
Many states have “no-fault” laws, which allow accident victims to claim medical or hospital expenses directly from their insurers, regardless of who was at fault.
