Car Insurance: Frequently Asked Questions
Car insurance is required in nearly every state, yet many people buy it without fully understanding what they are paying for. These answers cover the basics.
What coverages make up a typical auto policy?
- Liability pays for injury and property damage you cause to others.
- Collision pays to repair your own car after a crash, regardless of fault.
- Comprehensive covers non-collision losses such as theft, hail, fire or hitting an animal.
- Uninsured or underinsured motorist coverage protects you when the other driver has little or no insurance.
- Medical payments coverage helps with medical bills for you and your passengers.
How much liability coverage should I carry?
State minimums are often low compared with the cost of a serious accident. If a judgment exceeds your coverage, your savings and future income can be at risk. Many people choose higher limits and add an umbrella policy if they have significant assets. An insurance agent can help you choose limits that fit your situation.
What is a deductible, and how should I choose one?
The deductible is the amount you pay out of pocket on a collision or comprehensive claim before insurance pays. A higher deductible usually lowers your premium, but you need to be able to afford it if a claim occurs. Keep your deductible at a level you could cover from savings.
How can I lower my premium?
- Compare quotes from several insurers each time you renew.
- Ask about discounts for bundling policies, safe driving, good grades, anti-theft devices and low mileage.
- Maintain a good driving record and check that your credit-based factors are accurate where used.
- Reconsider collision coverage on an older car worth little.
Is car insurance tax-deductible?
Premiums for a personal vehicle are not deductible. If you use a car for business and deduct actual expenses, the business portion of insurance may be part of that deduction. If you use the standard mileage method, insurance is already built into the rate.
What should I do after an accident?
Make sure everyone is safe and call for help if needed, exchange information, photograph the scene, file a police report where appropriate, and notify your insurer promptly. Do not admit fault at the scene.
Does a claim raise my rates?
It can, particularly an at-fault claim, though insurers differ in how they treat them. Ask about the effect before filing a small claim you could pay yourself.
If you have questions about how vehicle costs fit into your finances or business, contact us and we will be happy to help.
This article is general information, not tax, legal or investment advice for your specific situation.