It seems, like everyone else, you’re doing research before buying car insurance. This is good. Car insurance isn’t something you buy in a hurry.
In a world of easily available price comparison and conflicting advice, knowing you have the right car insurance for the best price is worth your time.
You must know what factors make the difference when it comes to car insurance and premiums.
So, here we’ve discussed the main things to consider before buying your car insurance.
Let’s dive in!
Factors To Consider Before Buying Car Insurance Policy
It would be best if you considered the following factors before buying a car insurance policy for your car.
1] State’s Guidelines
Along with the general insurance guidelines, every state has specific additional insurance regulations, which differ from state to state. For example, most states demand liability insurance as the minimum insurance for every driver. On the other hand, some states demand PIP insurance alongside liability insurance to protect both drivers and the third party in case of an accident.
You need to consider all the regulations and requirements of your state before buying your car insurance policy.
2] Car Insurance Types
Before buying any car insurance, you must understand the different types of car insurance policies on offer and their coverage.
Depending on your car and its usage, the three main types of car insurance policies include:
- Liability or Third-party insurance: the basic insurance compulsory for all cars that cover damages for property and injuries you cause to others.
- Comprehensive insurance: provides complete insurance coverage in case of an accident, loss, or damage to the third party and to your car.
- Collision insurance: covers damage to your car after you’re involved in a collusion with another vehicle or nonmoving object. It provides coverage for repair or replacement costs.
Other types of car insurance coverage that you can consider depending on your budget and type of car are:
- Personal injury protection insurance
- Uninsured motorist coverage
- Underinsured motorist coverage
- Medical payments coverage
- Gap insurance
- Classic car insurance
- Towing and labor insurance
- Personal accident cover
3] Terms Of The Insurance Policy (Inclusions and Exclusions)
When buying insurance, you need to consider the policy’s terms – including the inclusions and exclusions.
Inclusions entail what the insurer and insurance policy offer in the cover. On the other hand, exclusions are the specific factors/situations that your insurance plan doesn’t cover.
If, for example, you want to buy a comprehensive insurance policy, you need to understand what it includes, such as vandalism, theft, etc., and what it excludes.
These terms are often spelled out in the policy, and you must be keen to read and understand them for informed decision-making.
4] Insurance Premiums
A car insurance premium is the amount of money you will pay for the insurance policy.
Depending on the insurance company or payment options, car insurance premiums may be paid monthly, every six months, or once a year.
Insurance premiums vary depending on a number of factors called rating factors.
If you understand your car’s needs and probability of risk in advance, you will know the right amount to pay as an insurance premium.
5] Car Insurance Rating Factors
When calculating the insurance premiums, insurers use different factors to determine your risk levels and the likelihood of claims. These factors are then used to calculate the price of your insurance.
Insurance rating factors may be grouped into four:
- Where you drive (address, location)
- Car make and model, size, age, etc.
- Demographic factors (credit score, age, gender, marital status)
- Personal driving habits (driving experience and record, yearly mileage, etc.)
Typically, the less risky you appear to the insurer, the lower your insurance premiums will be.
6] Insurance Deductible
When you buy insurance, your insurer will ask you about the amount you can pay out of your pocket if you’re involved in an accident before the insurance company pays the rest. This is called insurance deductible.
For example, if you’re involved in an accident and file a claim of $1,500, the amount your insurer will pay depends on your insurance deductible. If your deductible is $500, you must pay the $500 deductible first before your insurer pays the remaining $1,000.
The minimum accepted insurance deductible is different from company to company. Also, when you agree to pay more insurance deductibles, you can lower your insurance premiums.
7] Car Insurance Riders or Add-Ons
After buying your car insurance, depending on your car and state, you may feel the need to have additional coverage on the policy or extend the policy cover. You can do these using insurance riders.
Insurance riders are also called add-on covers, which can be added to an existing policy by paying an extra premium depending on your needs.
Examples of insurance riders include personal accident cover, on-road assistance, NCB protection, gap insurance, etc.
So, before you buy your car insurance, check the riders that the insurance provider can give you on your car insurance.
8] No Claim Bonus or NCB
No Claim Bonus (or NCB) is a reward that an insurance company can give you for not raising any claim during a policy year. But you will only get the NCB on the net policy renewal as a discount on your premium.
Everyone wants to enjoy a discount when renewing their insurance and beginning with an NCB also shows that you’re a careful and less risk driver.
Many insurers offer NCB only for new cars and state that used cars do not benefit because of the change in ownership.
You must consider the percentage of NCB you will get before buying a plan because it may help reduce the total renewed premium.
9] Insured Declared Value (IDV)
When you buy car insurance, the premium is calculated based on many factors, including car model, IDV, etc. In case of a total loss, you may want to claim a new car.
Insured Declared Value (IDV) is the car’s current market value calculated less than its depreciation amount.
This is why understanding your car’s IDV is important before buying insurance because it is important in deciding the compensation amount.
10] Brand Reputation
The insurer’s market image is an important factor to consider. By researching the brand reputation, you will get an idea of how reliable the insurance company is, including its claim process.
You can know how reliable the insurer is by looking at its track record and market rank. You’ll know when to avoid a car insurer that has a bad track record of claim settlement from their claim settlement ratio.
11] Network Garages
The main purpose of buying a car insurance policy is to protect you from any financial contingency in case of car damage or total loss. One of the best ways you can avoid such circumstances is through an all-around cashless service.
You will only get such a service from the car insurance company if your vehicle is repaired in their network garage.
This is why you need to look for a company with maximum network garages in their list and available in your area or location.
Final Thoughts
Most care insurance buyers make the mistake of not shopping around for the best policy premiums and benefits. Before you buy your car insurance, consider the factors we’ve listed here and compare them to your needs to help you make the best choice. With a little research and due diligence, you will get the best protection for your car within your budget.