Before you set off buying insurance for your car, you should know, auto insurance is a risky business. There are so many ways in which your insurance company can hoodwink you and get you to pay more than you have to. Here are eight things you should know before you get that auto insurance.
1. Know your coverage options
There are different types of coverage options you can choose. Research your situation and choose the one that fits you best.
- Liability insurance – The minimum every driver must have. It’s mandatory in all the states (except in New Hampshire). It covers the other driver’s injury and property in case the collision was your fault.
- Collision insurance – Covers your vehicle regardless of whose fault.
- Personal Injury Insurance (PIP) – Covers you and your passengers regardless of whose fault.
- Comprehensive insurance – Covers damages caused by natural disasters like floods, hurricanes and other non-collision events like fire and theft.
- Uninsured/Underinsured Motorist Coverage (UI/UIM) – Covers you and your vehicle against accidents caused by someone without insurance.
2. What defines your insurance
Insurance policies vary from one company to another and from state to state. Most insurance companies consider driving history, gender, location (ZIP code), age, vehicle make, model, vehicle use, prior insurance history, and marital status. Also, note that 90% of car insurance companies consider your credit scores to calculate the premium.
3. A reason for denial
There is every chance that the insurance company will deny coverage to you and your property. In that case, however, you have the right to know why they denied your request for insurance. Most state laws require that an insurance company should educate the insured about the reasons for cancellation. Also, when applying for insurance, no company can deny based only on the fact that another insurer had denied you once. Once you receive an explanation and still feel there has been an error, you can correct your application and apply again.
4. Notice of cancellation
In case your car insurance company decides to cancel or not renew your policy, they should give you a written notice of the reason. However, the period varies from state to state. For instance, while Massachusetts requires 20 days’ notice, Texas only requires ten days. If you think there’s been a mistake, you can appeal against the cancellation. Also, once you get a cancellation you must get a new policy as soon as possible. According to Insure.com’s consumer analyst, Penny Gusner, “A lapse of just one day can result in a penalty, and a lapse will typically cause your rates to go up.”
5. Anytime cancellation
You have the right to cancel your insurance policy any time. You can compare insurance quotes and if you find something better than your current insurer you can cancel. Also, note that you have the right to receive a refund of any unused premium. However, insurers can charge a penalty if you cancel before the expiration date.
6. About tickets and insurance rates
Make sure you ask your insurance company for their surcharge schedule. The schedule highlights offenses that add up and increase your rates. Do your research or consult with an insurance agent about the schedule and know what to watch out. Although small tickets like parking, non-moving offenses, equipment, etc. don’t affect your rates, some tickets affect your insurance premium rates and will land you in trouble.
7. Non-renewal criteria
Before you sign up with an insurance company, make sure you know their guidelines for non-renewal. These guidelines are, however, not fixed. They vary by state and company. Too many accidents within a given time, too many traffic offenses, suspension or revocation of license, conviction for leaving a crime scene, or insurance fraud are few reasons for non-renewal.
8. Your budget
Once you’re aware of all the risks involved in auto insurance, you should then ask yourself one important question, how much can you pay for it? An insurance is mandatory by law and not having one would get you a penalty. However, you can choose a policy that suits your situation and your pocket.
There are various aspects of purchasing an insurance, and the most important of them all is your budget. Since it’s mandatory by law, you need to make sure you purchase an insurance that will protect you while not burning your pocket. After all, you need to enjoy your ride too. That’s why you got need the insurance in the first place.
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