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The Layman’s Guide to Auto Insurance

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Before you drive off into the sunset, you need to know three things about your ride: What you’re operating is fast, expensive and one of the most dangerous pieces of machinery on the transportation continuum.

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Before you drive off into the sunset, you need to know three things about your ride: What you’re operating is fast, expensive and one of the most dangerous pieces of machinery on the transportation continuum. There’s a good reason auto insurance is mandatory in almost every state, and there’s more to it than covering your own rear end; it’s about protecting other drivers, too. Before getting behind the wheel, use this simple explanation of policies, discounts, types of coverage and general insurance vocabulary to help navigate the complicated realm of insurance and approach an agent with confidence.Learn the Lingo
While some insurance agents may translate a policy as they explain it, industry-specific vocab can still be difficult to interpret. Obtaining working definitions of common insurance terms not only shows a potential agent that you know what’s up, but also enables you to make solo decisions as you investigate coverage options rather than just taking offered recommendations. Remember: maintaining auto insurance may be the law, but the agents who offer it are selling a service. You wouldn’t buy a computer without knowing the specifications and comparing prices, would you?

Know What You Need
Figure out your coverage needs before embarking on a comparative insurance shopping quest. Investigate your state’s minimum liability limits, displayed as a series of three numbers separated by slashes. For example, 20/40/10 means that drivers are required to have at least $20,000 of bodily injury liability for one person in an accident, $40,000 total for all people in an accident, and $10,000 for property damage liability. These numbers determine how much coverage you need in case an accident is your fault. Any costs above insurance limits will come out of your own pocket, so paying for more than the minimum can really save your bacon down the road.

Collision and comprehensive are two common types of coverage, and together can total 40 percent of your premium. Some providers may recommend dropping comprehensive on older cars (clunkers, not classics) due to low resale value, in turn lowering the premium, but this makes any insurance-claimable repair costs solely your responsibility. Additionally, both types of coverage carry deductibles. The higher the deductible, the lower your premium will be, as the higher amount you pay toward repair costs lowers the end price for the insurance provider.

You don’t need to be a history major to know that the past counts. Your driving record, if you have one, will affect how providers see you. Do you have three speeding tickets and two claims from your previous insurance company? That’s a huge risk to providers; there’s a good chance they’ll have to pay out if they insure you. On the other hand, a squeaky-clean record means you’re a low-risk client, and rates are likely to remain lower.

Credit scores also factor into the risk providers associate with potential clients. Taking steps to clean up your credit score by paying bills on time and ensuring your history is free of erroneous charges can pay off — carriers of bad credit can pay up to 50 percent higher premiums than those who maintain a favorable rating.

Compare Policies
Now that you’ve mastered the terminology and assessed your insurance needs, take those skills to the table. There are three types of insurance providers. Familiarizing yourself with each before requesting a quote will allow you to pick the best fit.

First off, there’s the direct seller who offers insurance directly to consumers, which means, in theory, their rates are lower. However, these companies tend to avoid drivers with high-risk records, so our friend with three tickets and two claims might have to look elsewhere.

Next up are exclusive agents. National brands offer their services through exclusive agents, so that Allstate agent on the billboard only sells Allstate insurance. These large providers may be more likely to accept higher-risk drivers, but be ready for the premium to reflect that. As these are local agents, they are popular with people who value face-to-face interaction.

Independent insurance agents sell insurance from multiple companies, and are therefore able to give quotes from any of the providers he or she represents. This makes comparison shopping quick, as you can pick up multiple quotes in one stop.

Check for Discounts
Depending on your age, vocation, driving history and other factors, you may be eligible for a load of discounts. Cars with certain safety features or low annual mileage often make the cut, as do historically safe drivers and students with above-average grades.

Also look into multiline insurance, which may lower your price in exchange for packaging different insurance policies with one company.

Shopping around for insurance will save you money — even if you save only $30 per month that turns into $360 per year. The savings is definitely worth the work you put into shopping.

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