When someone owns a car, he needs to protect this investment. To protect this investment, one must insure his auto property with an auto insurance company to meet unexpected expenses instead of paying out of pocket for a loss. Auto insurance is an agreement between the auto holder or owner and the insurance provider that protects the auto holder or owner from any financial loss in case of a crash, accident, or theft. Similarly, in exchange, the holder or owner agrees to pay the premium as per the insurance company policy. This insurance policy safeguards a person’s financial well-being by mitigating any unexpected or unwanted costs associated with any damage to the vehicle.
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The article explores the importance of auto insurance, the factors involved in determining the cost of auto insurance, what auto insurance covers in the US, and the top five American auto insurance companies.
Factors Involved in Determining the Cost of Auto Insurance
Many factors help determine the cost of auto insurance. Below is a list of some standard parameters that most companies use to determine the cost of insurance.
- The driving record plays a vital role in determining the cost of the insurance policy. If you have better driving records, then you will pay lower premiums. On the other hand, if you have a track record of more accidents and traffic violations, you will pay more premiums.
- The cost of auto insurance also varies concerning the miles you drive your car. If you drive your vehicle long distances or you drive your vehicle routinely for work, then you will pay more. If you drive occasionally, which is also called “pleasure use,” then you will pay less.
- Age and gender are essential in determining insurance premium prices. Experienced drivers are less prone to accidents, so they pay fewer premiums. Moreover, statistically, it is proven that women drivers are less prone to accidents than men, so women get lower premiums than men, keeping all other things constant.
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- Driving in urban areas is more complex than driving in suburbs and rural areas. Urban drivers tend to get more accidents and thefts, so they pay more insurance premiums than small-town or rural-area drivers. So, location can also be a determining factor in determining the cost of auto insurance.
- Credit score is also one of the determining factors of insurance premiums.Insurance companies use credit-based insurance scores to assess risk and draw a correlation between credit history and the likelihood of filing claims. So, persons with low credit scores are charged with higher insurance premiums.
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What Does American Auto Insurance Cover?
Auto insurance companies extend various types of protections to their clients.
1. Liability Coverage
Liability coverage includes bodily injury and property damage coverage, which you may cause to others, i.e., you are at fault in an accident. If you are determined to be at fault, bodily injury liability pays for the other party’s medical costs, pain and suffering, and legal fees. It assists in covering their medical expenses and other associated costs as a result of the accident-related injuries they received. Conversely, property damage liability pays for replacing or repairing other people’s property you damaged in an accident.
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2. Collision Coverage
Collision coverage is optional auto insurance coverage that covers your cost in an accident, like rolling over your car, hitting a tree or fence, or colliding with another vehicle. Irrespective of the type of accident, this coverage helps to reimburse your costs associated with accidents. But remember, this coverage helps only in paying costs associated with your cost-not for the damages of another vehicle.
3. Comprehensive Coverage
Your car is covered under comprehensive coverage against events other than collisions. This covers theft, vandalism, fire, falling objects, and natural disasters like earthquakes or floods. Comprehensive coverage offers financial security against various non-accidental events that could harm or destroy your car. Like collision coverage, comprehensive coverage helps lessen the financial burden of unforeseen circumstances that may result in significant damage, making it especially beneficial for newer or more expensive cars.
4. Personal Injury Protection (PIP)
Personal injury protection, also called “no-fault protection,” helps cover expenses related to medical bills, funeral costs, loss of wages/work, etc., after an accident, irrespective of who is at fault. So, Regardless of fault, PIP coverage can offer crucial financial security and peace of mind in the case of an accident by helping to pay for medical bills and other costs related to injuries received in a car accident.
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5. Uninsured and Underinsured Motorist Coverage
Uninsured and underinsured coverage is also a kind of auto insurance that protects against any damage or injury in an accident with another driver who does not have insurance (uninsured) or doesn’t have enough insurance to cover those expenses. Uninsured and underinsured coverage are especially beneficial since they offer an extra degree of security in cases where the party at fault cannot pay their obligations, either because they have insufficient insurance (underinsured) or none at all (Uninsured). Although UM/UIM coverage is usually optional, it is strongly advised that you add it to your auto insurance policy to protect your passengers and yourself from the financial fallout from collisions with uninsured or underinsured drivers.
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Top Five American Auto Insurance Companies
According to Forbes, the top 5 auto insurance companies in the United States are:
- Nationwide: Nationwide is one of the world’s largest mutual insurance and financial services companies. It offers competitive rates for different ages and records. It provides some of the cheapest auto insurance services.
- United States Automobile Association (USAA): USAA has the cheapest and most affordable insurance rates. However, only military members and their immediate family members are eligible to qualify for it.
- Travelers: Travelers also offer insurance at very decent rates. Additionally, it has included accident forgiveness and small violation forgiveness. Travelers insurance focuses on protecting against financial losses that occur while traveling.
- Erie: Erie offers affordable rates for the majority of driver profiles, in addition to offering excellent rates for drivers who have committed accidents. Its low complaint rate and excellent rating for collision repair claim procedures also make it one of the best.
- Progressive: Progressive insurance offers the cheapest rates and accident forgiveness and has good teacher discount rates. It is the largest American auto insurance company in the US. Progressive Insurance is famous for customer care service and innovative technology.
Bottom Line
In a nutshell, it is imperative to have auto insurance in big cities where the chances of accidents are more significant than in small towns and rural areas. Besides, purchasing an auto is like an investment. That investment must be protected through insurance rather than paying out of pocket for an unexpected loss in an accident or theft. Moreover, the factors that are important in determining this insurance, the domain that auto insurance covers, and the best American Auto Insurance companies are listed above for better insight.
