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What you need to know about buying U.S. auto insurance

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Types of auto insurance in the United States include Liability Insurance, Collision Coverage, Comprehensive Coverage, Medical Payments Coverage, Uninsured Motorist Coverage, Personal Injury Protection, and other additional coverage. Uninsured Motorist Coverage, Personal Injury Protection, and other additional coverage.

auto insurance
  1. Liability Insurance Liability Insurance:
    Liability insurance is what we commonly call “semi-insurance” and is mandatory. Liability insurance pays for the other party’s medical expenses or property damage in the event of an automobile accident caused by you. Note: Liability insurance does not pay for your own property damage or medical expenses.
    Liability insurance is divided into two parts, Bolily Injury Liability and Property Damage Liability:
    a. Bodily injury liability: In an accident where the insured is liable, this part of the policy pays for the other party’s medical expenses.
    b. Property damage liability: In an accident, if the insured is liable, this part of the insurance is used to pay for the other party’s property damage.
    Example: Wang collided with Li’s car because he skidded when he turned a corner. At this point, the liability portion of Wang’s auto insurance policy will help pay for Lee’s bodily/property damage.
    The Minimum Liability Limit varies from state to state, usually ranging from $10,000 to $50,000 dollars.
    Take Massachusetts as an example:
    a. $20,000 for property damage resulting from a single accident.
    b. $40,000 if the accident results in bodily injury to a single person.
    c. $80,000 for an accident resulting in multiple bodily injury.
    Of course, this figure is only the minimum amount required by the state. In fact, the amount of bodily and property damage caused by an accident is much more than that. Typically, liability insurance coverage ranges from $100,000 to $500,000, or more, depending on the insurance company. You will have to pay out of your own pocket for any amount that exceeds the maximum coverage, so you should determine the maximum coverage based on your own property.
    Note: All provisions of general liability insurance do not cover the insured’s own damages. If the liability is on the other party, the other party’s liability insurance will pay for you. If you are responsible, then your bodily injury and property damage will be covered by Medical Payments Coverage, Collision or Comprehensive, or your own medical insurance may be able to intervene (depending on your medical insurance). If you do not have auto insurance or medical insurance, you will need to pay for your own medical care.
  2. Collision Coverage Collision coverage:
    Collision coverage is used to pay for your own damages, but is not required by law. The maximum benefit for collision coverage is the Actual Cash Value of the vehicle minus the Deductible. The lower the deductible, the higher the premium. Collision insurance is divided into Collision and Collision Deductible Waiver.
    a. Collision: Used to cover damage to vehicles caused by traffic accidents (regardless of which party is responsible).
    b. Collision Deductible Waiver: When an accident occurs and the insurance company has not yet determined who is at fault for the accident, you can let the insurance company pay for the repairs without using your deductible.
    Example: If you are unfortunate enough to hit a tree with your car, the Collision Coverage purchased can help pay for the damage to your car. Assuming the actual cash value of your car is $20,000 and your deductible is $1,000, the insurance company will pay you a maximum of $19,000.
  3. Comprehensive Coverage:
    Like collision coverage, comprehensive coverage is not required by law. Comprehensive coverage is used to cover open-ended risks other than collision, such as accidents involving small animals, hail, and smashed windows. Comprehensive insurance will also be referred to as OTC, Other Than Collision, and like collision insurance, comprehensive insurance pays up to the actual cash value of the vehicle minus a deductible, and the lower the deductible, the higher the premium.
    Example: If your vehicle is struck by a tree, your Comprehensive Coverage can be used to pay for the damage to your vehicle.
  4. Medical Payments Coverage Medical payments coverage:
    Covers medical and funeral expenses for the insured and the insured’s passengers after an accident, regardless of which party is responsible. If the owner of the car is driving someone else’s car or if the owner of the car is hit by a car, it is also covered.
    Example: Lee is traveling with his family and friends in his car, and if they are involved in a car accident, they will all be covered by the Medical Payments portion of Lee’s auto insurance policy.
  5. Uninsured Motorist Coverage: Uninsured/Underinsured Coverage
    On average, 1 in 8 drivers in the U.S. don’t have car insurance. This coverage comes into play when the other driver is responsible for the accident and does not have insurance, or in the case of a hit-and-run.
    a. Uninsured/underinsured Motorist Bodily Injury: This is a provision whereby the insurance company reimburses the insured for damages caused by bodily injury in an accident where the other party is liable but the other party is unable to pay for damages caused by bodily injury to the insured (or to the insured’s family members).
    b. Uninsured/underinsured Motorist Property Damage: In an accident where the other party is responsible for the hit-and-run and the other party is uninsured, this provision will compensate the insured for financial losses. However, it is usually necessary to have witnesses or catch the person involved in order to use this clause to claim for compensation.
    Example: You are unfortunately hit by Xiao Wang’s car, Xiao Wang is fully responsible for the accident, but Xiao Wang has not purchased car insurance, at this time, you have purchased this part will assist in compensating your medical expenses.
  6. Personal Injury Protection Personal Injury Protection:
    This is used to compensate the insured and the insured’s passengers for other expenses such as medical expenses, lost wages, funeral expenses, etc. incurred in a traffic accident (regardless of who is responsible for the accident). In the U.S., sixteen states are mandatory for car owners to purchase PIP, so we recommend that you consult with your insurance company if you have any questions when shopping for this insurance.
  7. Extras: Others
    a. Emergency Road Service: If the insured’s vehicle breaks down or becomes inoperable, the insurance company will pay the reasonable cost of emergency services. This includes on-site repair for the owner of the broken down vehicle (generally only the repair cost of no more than one hour can be covered, common special circumstances include broken down, flat tire, dead battery, etc.), towing service (the insurance company will tow the vehicle free of charge to the nearest garage for repairs; or towing the car to a gas station for refueling when there is not enough gas to make it safe for the car owner to drive).
    b. New-car Replacement: If the insured’s vehicle is wrecked, the insurance company will pay the cost of buying a new vehicle of the same make and model (less deductible) instead of the depreciated value of the insured’s totaled vehicle.
    c. Mechanical Breakdown: The insurance company will cover the cost of repairing or replacing the mechanical breakdown of the automobile, including engine, transmission, suspension, air conditioning, etc. The insurance company will also cover the cost of repairing or replacing the mechanical parts of the automobile.
    d. Rental Reimbursement: When a vehicle is involved in an accident and needs to be left in a garage for repairs, the insurance company will reimburse the insured for the cost of renting a car for a certain period of time, with a cap on the daily rental reimbursement and the total reimbursement for each accident.
    e. Gap Insurance: Also known as Loan/Lease coverage, this coverage pays the difference in price if the insured’s car is deemed a “write-off/total loss” after an accident, but the insured owes more on the car loan than the car insurance company will pay. For example, when a new car is stolen and the insured owes $25,000 on the auto loan, but because of its actual cash value, the auto insurance company will only pay $20,000, there will be a $5,000 shortfall in the amount owed on the loan, which would be covered by the gap insurance policy (generally only applies if the car was purchased with a loan).

There are factors that affect the price of premiums:

  1. State requirements
    The state in which you live is one of the biggest factors affecting auto insurance rates, with minimum car insurance premiums varying by as much as 318 percent from state to state. Since minimum coverage and mandatory items for auto insurance vary from state to state, the higher the requirements, the higher the premiums will naturally be.
  2. Age
    Auto insurance rates can vary by as much as 367% depending on age. Younger drivers pay higher premiums because they are considered less experienced and more likely to get into accidents, and after the age of 25, a driver’s car insurance premiums begin to drop.
  3. Car make and model
    Some vehicles will be cheaper to insure than others, for example, trucks are on average 3% cheaper to insure than cars.

Auto insurance companies are more likely to insure safe vehicles because there is less risk of resulting in a high claim. That’s why there are some discounts for vehicles with high safety ratings. On the other hand, some models are statistically more prone to theft, including the Honda Accord and all full-size Ford pickup trucks, so the cost of insurance goes up.

  1. High-risk violations
    Traffic violations and car accidents can increase the cost of auto insurance by 20% to 200%. How much the cost increases depends on the severity of the violation and any past convictions, and multiple traffic violations are considered high-risk customers by insurance companies.

Some companies keep traffic violations or car accident upgrades valid for as little as three years, but others may keep records for longer. If the last violation/car accident occurred more than three years ago, it’s time to shop around again to see if you can get cheaper insurance.

  1. Annual mileage
    The number of miles driven per year is also a factor in the cost of auto insurance because the longer you drive on the road, the more likely you are to be involved in an accident. As a result, insurance will be more expensive for longer daily commutes; if you only drive casually and occasionally, your premiums will be cheaper.
  2. Credit history
    In most states, credit history is an important factor used by insurance companies when calculating premiums, with drivers with poor credit scores paying an average of 71% more in premiums than those with good credit scores.

But if you live in California, Massachusetts, or Hawaii, these states don’t allow insurance companies to factor credit scores into the cost of auto insurance. But if you live elsewhere and have a high credit score, then you can save a little on your premiums.

7 Driving record
Driving record is also a factor in the cost of insurance. If you have a clean record, you may be able to pay 40% less in premiums than a driver with a bad history.

However, if a large number of insurance claims have been filed previously, you may be charged a higher premium, regardless of whether you are the at-fault party or not. Also, age matters, as new drivers over the age of 25 tend to pay more in premiums than their counterparts with years of driving experience.

  1. Zip code
    Where you live is an important factor for insurance companies to consider, and premium rates can fluctuate by as much as 91% between zip codes in the same California location.

Insurance companies will look at the address you provide to determine if you are in a high-risk area for a car accident. Living in a densely populated city center with high traffic volume will definitely make your premiums more expensive than in a sparsely populated suburb; in addition, the unemployment rate, crime rate, and the percentage of uninsured drivers in the area will also have an impact on your premiums because cars in high-risk areas have a higher chance of being stolen or smashed.

  1. Marital status
    Statistically, married drivers are the least risky drivers to insure, with up to 50% fewer accidents compared to all other drivers. So get married and remember to tell your auto insurance company that you can lower your premiums.
  2. Gender
    In some states, gender is also a factor in auto insurance rates. For example, men around the age of 45 pay an average of 6 percent less for auto insurance than women of the same age; however, male drivers in their teens tend to pay the most expensive premiums; the gender gap evens out among drivers in their 30s.