Car insurance protects you, your passengers and other drivers on the road. It helps pay for property damage and medical expenses.
Your vehicle, your driving history and your budget determine the kind of coverage you choose. Deductibles and limits also have an impact on your premium.
Car insurance rates can vary dramatically from one insurer to the next. They depend on several factors, including your state of residence, the make and model of your vehicle, and your driving history.
Rates can also change because of things that are out of your control, like a new driver or an accident. Even a single speeding ticket or DUI conviction can raise your premiums.
While it isn't a direct cause of your car insurance rates, having a good credit score can save you hundreds of dollars over time. Many large insurers will offer lower rates to drivers with good credit compared with those with poor credit, according to research by the Consumer Federation of America.
Another way car insurance rates can vary from insurer to insurer is based on your age and gender. Men are generally more likely to have accidents and file claims, so insurers charge them higher premiums than women.
Insurers also use a number of other criteria when setting prices, including your education level and whether you have any outstanding tickets or violations. A recent study by the Consumer Federation of America found that drivers with college degrees pay less than those with high school diplomas.
Those with good credit and no recent driving violations pay the lowest rates, on average, in most states. The best thing you can do to keep your rates low is to drive carefully.
It is a good idea to get quotes from multiple companies to find the most affordable coverage for you. You can use NerdWallet's car insurance comparison tool to compare personalized rates from a range of different providers.
A recent ValuePenguin analysis of rates from eight large insurers shows that drivers who have a clean driving record typically pay the lowest car insurance rates, on average. Other types of drivers, such as those who have been in an accident or had a traffic violation within the past few years, can see their rates rise, especially if they've had more than one claim.
Younger drivers, particularly those who have recently graduated from high school, are more likely to have accidents and file claims, which results in expensive car insurance premiums for insurers. However, there are some insurers that have lower car insurance rates for younger drivers, and you can use an online comparison tool to find them.
The right coverages can help protect your vehicle and your passengers from damages and injuries caused by other drivers. Coverages can be optional or required by your state, and may include bodily injury and property damage liability, uninsured/underinsured motorist protection, and medical payments.
Bodily injury and property damage liability covers the cost of paying for your medical bills and repairs to other people's vehicles if you cause an accident. This type of insurance is often required by law in some states, and can be an affordable way to get the protection you need for your car.
Collision coverage is another type of auto insurance that pays to repair your car after a collision with another car or object. It's an essential part of any policy, especially if you have a loan or lease on your vehicle and are required to carry this insurance by the lender.
Comprehensive insurance coverage also helps pay for your vehicle if it is damaged by fire, theft, vandalism, falling objects, windstorms, floods, earthquakes or other events not related to a collision with another car or object. Some policies also include glass coverage that reimburses you for damage to your windshield if it is cracked or shattered.
Some states require medical payment coverage, which pays for your and your passengers' medical expenses and funeral costs after an accident. This optional coverage can also be used to pay for lost wages and other financial losses if you aren't able to work after an accident.
In addition, some states require personal injury protection (PIP), which pays for your medical expenses if you aren't at fault in an accident. It can be an inexpensive option, but it's a good idea to check your state's requirements and compare quotes to find the best option for your situation.
Your age and occupation can also play a role in your auto insurance rate. Drivers with certain professions, such as firefighters or police officers, typically have higher rates than other drivers. Consumer advocates have challenged this practice, and some states are considering banning it. Similarly, how you handle credit can have an impact on your car insurance premiums.
Deductibles are a key factor in car insurance, and they play a major role in determining the cost of your policy. They allow you to share in the financial burden of covered losses and help you decide how much risk you’re willing to take on.
There are many different deductibles available, and they depend on the type of insurance you have. The most common types are comprehensive and collision, although there are other options as well.
A deductible is an amount you’re required to pay out of pocket before your insurance company will begin paying on your claim. The deductible can be either a fixed amount or a percentage of the coverage you have. In most cases, your deductible is set and agreed upon when you first purchase a policy.
Choosing a deductible is often a matter of budget constraints and personal tolerance for risk, but there are other factors to consider as well. For example, the actual cash value of your vehicle could affect how high you should set your deductible.
In addition, some lenders restrict the amount of your deductibles when you finance or lease your vehicle. It’s best to check with the lender ahead of time and see what their policy is.
If you choose a higher deductible, you’ll save on your premium, but you’ll have to pay more out of pocket in the event of a claim. This can be a difficult decision to make, and it’s important to price out the savings at various deductible levels before changing.
For example, if you raise your deductible from $250 to $1,000 and save $150 on your premium, it may take five years for the lower costs to offset the higher deductible in the event that you file a claim.
For most people, the best option is to choose a deductible that’s affordable and that they can handle should they have to make a claim. In this way, they’ll be able to protect their finances and still be able to drive safely. However, it’s also important to remember that a high deductible will increase your monthly costs and will be harder to afford in the event of an accident.
If your car is damaged in an accident, you’ll need to pay the excess on your insurance policy. This amount is set by the insurer and can vary depending on your driving history, age, and car model.
You can choose how high you want your standard excess to be, but it’s important to understand that choosing a higher excess can save you money in the long run, but will put more of the cost of any claims back into your pocket. The best way to find a balance between the two is to compare different policies and make sure you’re satisfied with the level of standard excess you’ve chosen.
A compulsory excess is set by the insurer and can vary according to your driving history, age, and car model. Typically, the more expensive your car is, the higher your excess will be.
Voluntary excess is also optional and you can choose how much of the excess you’d like to pay. It’s a great way to save money on your premium, but it’s important to know that this extra amount is not refundable in the event of a claim.
The excess is paid to the insurance company in exchange for a promise that they will pay you the full cost of any damage or loss caused by an accident on your policy. It’s a way of deterring fraud, so the insurer is less likely to have a claim from someone who’s not at fault.
Generally, you can’t have more than one excess on your policy. But, if you have more than one, the total excess will be the combined amount of your compulsory and voluntary excesses.
When you’re making a claim, the insurer will look at how much the damage or loss is worth and then determine whether or not it will cover the full cost of the repair. They’ll then add this to the amount you paid to them.
In general, the higher the excess, the lower your premium will be. However, be aware that a higher excess can also make it more difficult to find affordable insurance. If you’re a safe driver and have a clean driving record, it may be worthwhile to go with a higher excess.