Is Auto Insurance Absolutely Necessary?

March 8, 2017 · Posted in General Articles on Car Insurance 
by Theodore Hoffstrader

This may seem like a naive question: but why is Auto Insurance necessary?

Put in the simplest terms, auto insurance is contract between a policy holder and the auto insurance company. This contract determines that the policy holder pays a predetermined premium, and the insurance company pays for any losses (the precise details are specified in the policy).

Auto Insurance provides coverage of medical expenses, property loss and liability. If an accident occurs, and you are at fault, the insurance company will likely have to pay for your medical bills and property bills. Additionally, it would have to pay for any injures that were caused by you to the other driver as well as any damages that were caused to his car. Similarly, if you are involved in a car accident and the other driver is at fault, their insurance company would have to cover your losses as specified by their insurance plan.

This type of agreement effectively shields you from a potential lawsuit if you get into an accident. Furthermore, if you are the victim at a car accident, that is, involved in a car accident caused by someone else, your insurance may cover your medical bills and property damage as well (this is determined by your specific plan). In this event, your insurance company may decide to sue the other driver to recover their costs.

Factors that can determine your Auto Insurance premiums are age, gender, marital status, geographical location, previous driving violations, type of vehicle you wish to insure, accident claims, your credit rating, occupation, education, driving distance per year, years of driving experience, miles driven to work, business use of your vehicle, theft protection and safety devices on your car, and whether you have multiple drivers and cars on your policy. For instance, a married female driver over the age of 25 will have a lower rate than that of a single 18 year old male driver.

Living in a big city is likely to increase your premium because the chance of being involved with a car accident in an area that is highly congested are greater than, say, in a rural area where there aren’t as many cars. It is possible to receive a discount on one’s insurance by including safety and theft deterrent devices on cars, as these have been proven to reduce risk of injury and loss.

To make sure that you get the lowest premiums on your Auto Insurance, make sure that you shop around. One company may find your occupation to be a higher risk than another company, while another may find that your geographic location poses a greater risk than another carrier. It never hurts to get several quotes that all compare the exact same coverage. You never know, if a company knows that you are shopping around they may have a way to beat the lower quote of their competitor.

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