Frequently Asked Car Insurance Questions: Answers and Free Advice

January 27, 2012

Purchasing car insurance for your vehicle can be a confusing and frustrating task, and it can oftentimes be difficult to find answers to your car insurance questions. Car insurance is required by every driver in the United States and in most other countries throughout the world as well, so it is something that many people have to deal with on a daily basis. While there are a huge number of different car insurance providers and coverage types, there are some things that hold true for any type of insurance. Read on for some of the answers to your most common car insurance questions.

Question 1: What are Minimum Car Insurance Requirements?

Minimum car insurance requirements are the state mandated lowest limits for car insurance. Because these values are controlled state to state, each jurisdiction has its own set of minimum car insurance requirements that you must abide by. This information can be found by consulting with an insurance provider in your state or by looking online. However, you should keep in mind that the state required minimum car insurance limits are oftentimes not enough for your car insurance needs. Purchasing a minimum car insurance plan that insures 3 people for $20,000 each and up to a total of $60,000, for instance, will not cover an entire family of 4 people. Because of this, you should always consult with your car insurance provider to determine what the minimum level of insurance that will meet your unique needs.

Minimum car insurance requirements are listed as 3 numbers separated by slash marks. The first two numbers represent the bodily injury limits, while the last number gives the property damage limit.

Question 2: What is Gap Insurance?

Gap insurance is a type of car insurance that covers the difference between the value of the car and the amount of money that you've paid for the same vehicle at the time of an incident. Effectively, this means that gap insurance helps to protect your investment if you're paying a monthly payment for your vehicle. If your car is damaged, lost or stolen before it is completely paid for, the gap insurance will help to cover the cost of the difference. This is important because that amount of money that you haven't yet paid to the car dealer for your vehicle is not a loss to you; it's a loss to the dealership. This means that, under normal circumstances, you'd still have to continue making car payments to that dealer until you had completely covered their loss for the vehicle. Of course, if your vehicle was damaged or stolen, then you'd be paying money for a car that was inoperable. Thus, gap insurance helps to take care of the difference.

Question 3: How Does Credit Score Influence Insurance Costs?

Credit score and insurance costs are somewhat correlated. The lower your credit score is, generally speaking, the higher your insurance costs may be. Unfortunately there is no way to accurately estimate just how much a certain credit score may affect your auto insurance costs, however, because there are a number of other equally important factors that go into determining your monthly insurance premium payments. Among the most important of these are your driving record, the age and driving records of those in your family who will also be covered by the insurance plan, the type of car that you have, the damage and prior incident history of that car, and more.

Question 4: What is No Fault Car Insurance?

No fault car insurance is an alternative to standard car insurance claims procedures that has been enacted and introduced into legislation by several states. Under a no fault car insurance program, neither driver in an accident or collision is deemed to be at fault. The result is that each driver deals with his or her own damages and expenses individually, and that both of these parties work only with their own insurance companies to cover the costs of any repairs or other work that needs to be done.

No fault insurance was brought about because of a dramatic increase in the number of car insurance claims proceedings and lawsuits that were enacted in order to determine the fault of a driver in an accident. Under standard insurance practices, if both drivers deny responsibility for an accident, as they are often known to do, the case must be settled in court in order to determine which of the two drivers was responsible for causing the car collision from a legal standpoint. This takes up valuable court time and is also an expensive procedure.

Regardless of what your state plan is, you should always take down the contact information and insurance details from any driver who is involved in a collision with your vehicle. Report the accident to your own car insurance company immediately. They will inform you of the proper way to proceed with a no fault car insurance claim, if that is appropriate to your state.

Question 5: How do Deductibles Work?

A car insurance deductible is a set amount of money that your car insurance company includes with your insurance plan. The deductible is the amount of money that you will pay for the costs of repairing or replacing damaged or broken parts after a collision or some other incident that is covered by your insurance provider. Typically, insurance companies change deductibles for different plans based upon the current economy and your own driving history. A deductible of $200, for instance, means that your insurance company will cover all costs of your repair work for your vehicle aside from that $200. Some companies also have a spending cap or a limit on the total amount of money that they will pay for repair work as well. If your deductible is $200 and the cost of repairing your vehicle after a collision is $1300, the insurance company will pay $1100 of the repair costs and you'll be expected to pay the remaining $200. Following the use of your deductible, the insurance company will likely increase the total costs of your car insurance premiums that you pay each month.

Question 6: What are the Different Insurance Coverage Types and How Much Should I Get?

This is one of the most difficult questions that inexperienced car insurance shoppers have to deal with. While insurance of some type is mandated by the United States, there are a variety of different levels of protection that are available. Generally speaking, the more comprehensive the insurance coverage package is, the more expensive it will be and the higher the costs of your monthly insurance premiums.

The most comprehensive type of car insurance is a total coverage package. These are also often called fully comprehensive insurance packages. They cover the costs of a wide variety of different damages and incidents that may occur to your vehicle, including loss, theft, damage in collisions, fires, and other natural disasters, and more. If you have a good amount of money to devote to car insurance payments, or if you own a rare or an expensive vehicle that you wish to protect as thoroughly as possible, a full comprehensive plan may be the best one for you.

The middle level of insurance coverage typically covers just fire damage, theft and third party collisions. This is the most common form of car insurance and is an excellent choice for most car owners. This type of insurance will protect your vehicle in the case of any fire damage as well as other driving related incidents and collisions. If you live in an area where car theft is particularly high, you may wish to consider purchasing a type of auto insurance coverage that details that incident as well. Standard insurance plans typically do not have a clause for theft coverage. Because this plan is somewhat less comprehensive than the full coverage plan, these insurance types are generally quite a bit cheaper.

The least expensive and most basic type of coverage is third party insurance. Third party insurance refers to insurance coverage that helps to pay for damages to a vehicle in an accident when you are driving and are at fault. If you live in a no fault insurance state, your car insurance company may not offer you protection for your investment and vehicle under this type of insurance, so it's a good idea to investigate that matter thoroughly before you make your selection of a car insurance plan.

Finally, there are customized types of insurance that are available as well. These typically go to unique cars, such as classic or antique models, rebuilt and custom designed vehicles.

These are some of the most common questions that car owners have about vehicle insurance. However, there are many other facets of car insurance that are important to investigate and understand before you purchase an insurance plan. If you have further questions, speak with an insurance agent or representative today.