So, you have just completed the financing process of your dream car and can't wait to get behind the wheel. But there is one thing remaining: car insurance. Unfortunately, car insurance is not something you can rush through, especially if this is your first time.
For example, when shopping online, you will encounter many longstanding misconceptions about insurance, some of which might lead you to bad financial decisions. So, here are three crucial things you need to know about auto insurance.
How Premium Prices Are Determined
Different insurance companies use different criteria to calculate premium prices. However, some factors cut across all insurance companies. These include your driving record, your type of car, and the usage of your car.
Some demographic factors might affect your insurance premium rates. For example, if you live in an area with multiple car thefts, you will pay more for insurance than a person living in a safer neighborhood. If you are a male teenager, you might also incur higher costs because most insurers consider young males to be high-risk drivers. Therefore, insurance companies will consider many factors when calculating your premium amounts.
There Are Different Ways To Reduce Your Car Insurance Payments
You can reduce your premium amounts by setting higher deductibles. That means, if an accident happens, you will have to cover a huge portion of the damage from your own pockets. Hence, before taking this step, ensure you're financially capable of covering any high costs that would occur.
The other way to reduce your premium payments is to take advantage of insurance discounts. For example, combining both your auto and homeowner's insurance might earn you a discount. If your teenage daughter is going to college and will not be driving your car, you might also qualify for a 'student away' discount.
Some Critical Coverages Are The Cheapest
In most states, it's mandatory to have liability insurance. Granted, it's also the most expensive insurance coverage because if you're involved in an accident that causes massive damage, your insurer will be on the hook for large amounts of money.
Luckily, most of the optional coverages are pretty affordable. You can take additional coverages like gap coverage, rental reimbursement, comprehensive coverage, and roadside assistance for a minor price increase. For example, comprehensive coverage, which covers your car for theft, vandalism, and fire, is the most expensive of all the optional coverages, but it will only cost you a third of the liability coverage price. Thus, don't be afraid to try different coverages.