Auto insurance works roughly the same as other types of insurance, such as homeowners insurance and health insurance.
First, you purchase a policy, which outlines the types and amount of coverage that you want. Typically, car insurance policies must be renewed every six months, though some companies may offer longer or shorter policies.
After you’ve purchased your policy, you will be responsible for paying your premiums. Most insurance companies will give you the option of paying up-front for all six months (usually for a slight discount) or on a monthly basis.
If you are involved in an accident, you’ll need to submit a claim to your insurance provider and pay any deductible that you are required to pay. Once you have paid the deductible, the insurance company will pay any remaining expense. Importantly, car insurance deductibles typically reset with every claim, not on an annual basis.
What Factors Influence Auto Insurance Rates?
How high your car insurance premiums are will depend on a number of factors and considerations. This may include:
- Your car: How old is your car? How much is it worth? Does it have any features, such as built-in security, anti-theft mechanisms, or anti-lock brakes, that reduce the likelihood that you will make a claim? All of these will impact your rates.
- Your driving record: How long have you been driving? Have you been in an accident before? Do you have a clean record? Have you ever had a DUI? Drivers with a long history free of accidents will typically pay less than new drivers or those who have been in multiple accidents.
- Your commute: Do you have a long or short commute? Do you regularly travel long distances or do you usually drive locally? The more you drive, the greater the opportunity you may be involved in an accident, and the higher your rates may be.
