Understanding the Basics of Auto Insurance

Auto insurance is basically a contract involving the insurer and the insured, wherein the insurer promises to pay benefits in case of accidents. The insurer expects to be paid the agreed premiums, in most cases, monthly, quarterly, or yearly. In return, the insured has to purchase an insurance policy that pays the agreed premiums. An insurer may also sell insurance to the insured without ever collecting payments from the insured.

Premiums are usually based on several factors, such as the age of the driver, his driving history, his past claims, etc. The insurance company calculates the premium using these factors. However, many auto insurance companies provide different methods of calculating the premium. It is therefore important to compare different policies from time to ensure you get the best deal.

One of the factors considered by the auto insurance company is the type of accident, the insured has been involved in. Certain types of accidents are more prone to causing loss of premiums, such as those caused by drunk drivers, because the risk of loss is higher. Therefore, if you have been involved in any car accident where the other driver was drunk, you may lose your chance to lower your premium.

Some auto insurance companies offer uninsured motorist coverage, which is an optional feature for drivers. Uninsured motorist coverage relieves the insured motorist of the financial responsibility if he is in an automobile accident in which another driver is at fault. This coverage may also save the driver from having to provide compensation to the other person involved in the accident if the insured is at fault. Uninsured motorist coverage helps you save money if you are in an accident, but you do not have to spend it if the other driver is not covered. However, it is important to note that uninsured motorist coverage may not help you if the other driver has any sort of insurance coverage, such as collision or comprehensive coverage.

Some states offer discounts to drivers who pay their premiums on time. If you have a good driving record and are a stable job holder with a steady income, you may qualify for some type of discounted auto insurance coverage. For example, if you own your own business, or if you work for a company that has an office in a particular city or state, or if you are a member of a business or union, some auto insurance companies offer special deals to their members or prospective members. Similarly, many states offer different discounts for certain demographic groups such as senior citizens, students, or military personnel.

One reason that people choose to purchase personal auto insurance is because they want to avoid paying medical bills after an accident or receiving compensation for lost wages. Personal injuries coverage pays the cost of medical care and lost wages for anyone who is injured in a traffic accident, regardless of whether the accident is his fault. People who own their own business or own a home are especially interested in this coverage, since accidents that occur on their property can cost them thousands of dollars in medical bills and lost wages. Having personal auto insurance is often the best way to protect these assets.