Liability insurance for an automobile is mandatory in almost every state. Liability insurance will cover the policy holder for damage caused to another’s property or bodily injury as a result of the policy holder’s mistakes. Each state determines the minimum amount of liability insurance, and additional coverage can be purchased through most automobile insurance carriers. Knowing how insurance companies calculate premiums and what additional insurance coverage will cover when purchased is essential to obtaining adequate protection and peace of mind.
In addition to liability insurance, automobile insurance can also cover other situations where the policy holder is not responsible. Medical payments coverage will protect the policy holder in the event that they were injured by no fault of their own. This insurance would cover the policy holder involved in a rear-end collision at a stoplight, where the policy holder was completely stopped and another automobile driver was at fault. Automobile drivers should also consider:
- Collision coverage: protects the policy holder in the event of a collision with another vehicle or stationary object.
- Comprehensive coverage: protects the policy holder against natural catastrophes, such as fire, wind, hail, and flooding. Coverage also includes vandalism, theft, and collision with an animal.
- Uninsured motor vehicle coverage: some drivers, despite the legal requirements to have liability insurance, do not have liability insurance. This coverage can protect you from these drivers during an accident.
- Underinsured motor vehicle coverage: some drivers only purchase the legal minimum for liability insurance. Underinsured coverage will provide the policy holder additional protection in the event an accident with an underinsured driver occurs.
The mandatory liability coverage that each state requires will not protect the policy holder in a multitude of situations. The insurance buyer should weigh the risks to determine the amount of additional coverage that should be purchased. Careful thought and research should be placed into each additional policy purchased. Fear is often used by insurance companies to increase premiums and policy coverage sold. The buyer should make sure that their fear and concerns are actually protected by the additional coverage added to their policy.
Insurance companies use several factors to calculate premiums. Some factors, such as how much you drive and what type of car you drive, can reduce your premiums.
Factors That Can Be Controlled
- What kind of car do you drive, and how much will it cost to replace or repair?
- Where do you live: suburb, city, or rural countryside?
- How many times per week do you drive your vehicle?
- How many moving violations, accidents, and other vehicle incidents have you had recently?
- Do you have a 4-year degree or graduate degree?
- What is your credit score?
Factors That Cannot Be Controlled
- Age, sex, and marital status
In general, you get what you pay for, and if you purchase automobile insurance from a less reputable company and receive unbelievably low annual premiums, don’t be surprised when you file a claim and it is initially denied. Don’t forget to disclose past claims or inform your insurance company of your new ridesharing gig. Failure to inform your insurance company can be cause for your insurance claim to be denied and your policy to not be renewed.