7 Things You Need to Know About Your Auto Insurance

By [http://ezinearticles.com/?expert=Matt_A_Burke]Matt A Burke

Understanding how the auto insurance industry can be as confusing as trying to learn how to drive a stick shift car for the first time. However, some basic insider knowledge can help you understand your options, what you can do to save money, and how you can get the most out of your auto insurance.

1. Don't let your policy lapse.

Most insurance companies view drivers who are licensed but don't have insurance as risky or irresponsible. If you let your policy lapse, you'll probably pay more when you go to buy car insurance. To avoid this in the future, if you don't want to pay for insurance or plan to let your policy expire because you want to switch companies, make sure to purchase car insurance before your current policy is cancelled.

2. Factors that affect insurance rates.

Auto insurance companies use many different criteria when evaluating an insurance application during a process called underwriting. Each car insurance company has many guidelines regarding which groups of drivers they want to accept and how much they will charge those groups they consider a greater risk. The guidelines are different for each company, meaning that two companies comparing the same driver can arrive at vastly different conclusions.

During the underwriting process, car insurance applicants are placed in a group based on how much money and how many claims the insurance company believes it may have to pay. Underwriting is done automatically by software behind the scenes. At this time, the insurance company will look at motor vehicle records to see how many accidents or tickets a driver has received. Although accidents and violations can only affect the rates you receive for three years, many companies tend to look back five or more years when deciding if they want to offer you insurance. In addition, many auto insurance companies look at the credit history of the applicant.

3. Some coverage's may still be cheap and good at the same time.

Auto insurance may be expensive, but if you're already spending a lot, shouldn't you get a lot? Optional coverage's such as gap coverage, roadside assistance, rental reimbursement, uninsured/underinsured motorist coverage, and comprehensive coverage can provide a lot of protection for a little price increase. Comprehensive coverage is usually the most expensive of these coverage's, but is still usually about half the price of collision coverage and a third the price of liability coverage.

Uninsured/underinsured motorist coverage is especially important, considering the benefits it offers and the number of uninsured drivers on the road, particularly during this period of economic hardship. Take a look at your coverage options. Paying a little more now may save you a lot in the future.

4. Insurance prices vary from company to company.

You've probably seen commercials saying you can save money by switching to a certain car insurance company. How can so many companies make this claim? The reason is that "auto insurance is a highly competitive business and one of the most effective ways to reduce insurance costs is simply to shop around," according to Jeanne Salvatore, senior vice president of the Insurance Information Institute. "Drivers should look for an insurance company that will provide a good price along with excellent service."

Stipulations in the law set prices for the same policy from the same company. They are approved by the state and can't be changed by an agent, so you can't get a better price for the same policy simply by going to a different agent or trying to negotiate the price.

5. More coverage means more money out of your pocket.

The majority of your car rel=nofollow insurance premium typically goes toward the legal liability portion of your policy. It's not a very smart idea to reduce this portion in an attempt to save money, because you'll be responsible for any amount of damages your policy doesn't cover. However, other coverage's, although generally helpful, could be reduced or eliminated to lower your premium. If you have an older car that's not worth very much, or if you won't have a problem paying for a new car, collision and comprehensive coverage's may not make economic sense.

6. Higher deductibles mean lower premiums.

Insurance prices are based on how much money the insurance company believes it could have to pay. If you agree to pay for a larger portion of your own damages by raising your deductibles, your car insurance company automatically knows they won't have to pay as much for your claims. Because of this, they will usually give you a lower premium. If you decide to raise your deductibles to save money, be sure you can afford to pay the deductible if you have to make a claim.

7. Insurance discounts.

Many insurance companies offer auto insurance discounts for things like a safe driving record, good grades, car safety features, anti-theft devices, electronic payments, payment in full, and more. http://justautoins.com/payments/view/purchase_auto_insurance_online/

Article Source: [http://EzineArticles.com/?7-Things-You-Need-to-Know-About-Your-Auto-Insurance&id=3584916] 7 Things You Need to Know About Your Auto Insurance