Understanding the Basics of Auto Insurance

Auto insurance can be confusing. You hear terms like "25/50/25" or "liability" and "comprehensive coverage." While you may have an idea what all of that means, you may not understand the details or the implications for your insurance rates. Before you shop around for quotes on car insurance, you need to understand the basics of insurance.

Coverage Types

All auto insurance falls under two basic categories: liability or comprehensive/collision. While you may have riders or special add-ons, these are the two main components.

    • Liability provides coverage if you are at fault in an accident. This policy covers the cost of medical care for the other person as well as damage to the vehicle.

    • Comprehensive/collision coverage pays for costs associated with the repairs of your vehicle if you are in an accident or have other damages that result from situations such as theft, fire or vandalism. You may also have medical coverage for yourself and your passengers if you should be injured in a vehicle accident.

Liability is required by state law in almost all of the states, but each state sets its own minimum amount. Comprehensive and collision coverage is not required by law, but a lender may require it if you are financing your vehicle.

Liability coverage typically makes up the bulk of the cost when looking at your policy as a whole. If you do not carry this coverage, you may be fined or even have your license suspended.

How Rates Are Calculated

When you look for free car insurance quotes, you may be surprised at the variety of prices you are given. The reason for the disparity is based on how the rates are calculated. Each insurance company can set its own rates as long as it is consistent for all customers and is not considered excessive and follows the rules of the state.

For instance, one company may place a higher value on your credit history while another one places only moderate value on that data. One provider may offer forgiveness for your first claim or traffic violation while another one figures it in for your rates. In this instance, forgiveness means it is not counted against you.

Some common factors used in calculating insurance rates include:

    • Age

    • Marital status

    • Credit history

    • Location of residence

    • Distance to work

    • Make and model of car

    • Previous driving history

    • Gender

Some of these factors cannot be changed. In other cases, such as your credit history or the type of car you drive, will change over time. This means that your rates can also change.

When shopping for free car insurance quotes online, make sure you are comparing the same amounts and types of coverage. This ensures that the amounts you receive in your quotes are more accurate. Then, you just have to choose the best option for your needs.

How to Save Money
with Free Quotes

Car insurance can be quite expensive. It takes a chunk out of your budget every month, and yet it is necessary to have. You can shop around and ask for free quotes on your car insurance to help you save money. Some people have found that by switching providers, they saved hundreds of dollars in just a few months.

read more

Understanding
the Basics

Auto insurance can be confusing. You hear terms like "25/50/25" or "liability" and "comprehensive coverage." While you may have an idea what all of that means, you may not understand the details or the implications for your insurance rates. Before you shop around for quotes on car insurance, you need to understand the basics of insurance.

read more

Latest Posts

01/How to Get the Best Quotes

To get the best free car insurance quotes, you need to provide accurate information, so be sure to know what kind of coverage you need and how much, as well as other details.

02/High-Risk Drivers

What you need to do is to compare quotes on car insurance to find out which companies offer the best deals for high-risk drivers. Not all companies have the same rate structure. Find the one that benefits you in your situation.