Auto Insurance Explained
Auto Insurance is a service designed to provide you financial protection in the event that an accident happens with your vehicle. In most states, it is unlawful to drive your vehicle while you are uninsured, and it is also unlawful for insurance companies to sell insurance in a particular state without being licensed by that state’s board.
Auto Insurance Premiums are the amounts you have to pay in order to be insured on a policy. You have to pay a premium to the company, and in return, the company pays for your valid losses when an accident happens while you carry the policy.
Auto Insurance Policies are written by insurance companies, also known as carriers, to state your coverages. The policy specifies what the carrier will pay in the event that you have a valid loss. Most auto insurance policies are written for a 6 month or 1 year term. Monthly payment arrangements are usually available at a slightly extra cost.
Types of Auto Insurance Protection
Property Coverage: pays for damages to your vehicle.
Liability Coverage: pays for your legal responsibility when bodily injury or property damage is inflicted upon another motorist.
Medical Coverage: pays for medical treatment of bodily injuries; lost wages and funeral expenses may also be accounted for depending on your policy.
Policies can include both collision and comprehensive protection. Collision protection refers to covering damages that occured from a traffic accident. Comprehensive protection refers to covering damages that occured outside of a traffic accident. This includes damages acquired from vandalism, severe weather, or even theft of your vehicle.
Types of Auto Insurance Agencies
An insurance agency represents one or more insurance companies for a particular local area. The insurance agent is the person who sells policies for the carrier, and the agent works as arbitrator between the carrier and the customer.
Captive Agents work as employees to sell insurance from one carrier.
Independent Agents work as contractors to sell insurance from numerous carriers, tend to sell other financial products, such as wealth management.
Direct Writer insurance companies sell insurance directly through some type of automated media, where there is no insurance agent available.
Things You Should Know About Your Auto Insurance Policy
What Are Deductibles?
Auto Insurance Policies tend to have deductibles, also known as excess payments. An excess payment tends to occur when you make a claim on your policy. You have to pay the deductible amount in order to get the rest of the damages paid for by your company. The higher your deductible amount, the smaller your premium payments will be. You will pay a lot more when an accident happens and pay less on your premium.
How Are Premiums Determined?
Auto Insurance Premiums are strongly based on your driving history, as well as several other factors like age, credit rating, and the vehicle itself you are insuring. Too many accidents and or traffic tickets in a 3 to 5 year period will significantly affect the cost of your auto insurance premiums.
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