Car insurance is a necessity, but paying over the odds for cover isn’t – comparing quotes is always a quick and easy way to see what your options are. This way you’ll be able to find the right policy that offers all the coverage you need, for the best price available.
Car insurance is effectively a contract between yourself and an insurance company in which you agree to pay premiums in exchange for protection against financial losses stemming from an accident or other damage to the vehicle1. Auto insurance can offer coverage for:
Vehicle damages, including your car or another driver’s vehicle
- Property damage or bodily injuries caused by an accident
- Medical bills and/or funeral expenses associated with injuries sustained in an accident
Lots of different things can affect the price of your car insurance, but in general, your premiums usually tend to get cheaper as you get older. 20 – 24-year-olds, for example, pay £1,241 a year for fully comp cover, 30 – 39-year-olds pay £627, and 50 – 64-year-olds pay around £3214.
Auto Insurance Costs
There are two primary costs associated with purchasing car insurance: premiums and deductibles.
Auto insurance premiums vary depending on age, gender, years of driving experience, accident and moving violation history, and other factors. Again, most states mandate a minimum amount of auto insurance. That minimum varies by state, but many people purchase additional insurance to protect themselves further.
Additionally, if you’re financing a car, the lender may stipulate that you carry certain types of car insurance. For instance, you may need gap insurance if you’re purchasing an expensive vehicle that will likely depreciate very quickly once you drive it off the lot. Gap insurance can help to pay off the difference between the vehicle’s value and what you still owe on it if you’re involved in an accident.
See, Travel Insurance
A poor driving record or the desire for complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk, which means increasing your deductible.
Your deductible is the amount you have to pay when filing a claim before the insurance company will pay out anything to you for damages. So, for example, your policy may have a $500 or $1000 deductible. Agreeing to a higher deductible can result in a lower premium but you’d have to be reasonably sure you could cover the higher amount if you need to file a claim.
That’s because insurance companies think younger drivers are more likely to make a claim because they have less driving experience and a higher chance of being involved in an accident.
A fully comprehensive cover is usually the cheapest option, even though it offers the most coverage out of the three options. It used to be the other way around until insurers noticed they were getting more claims on third-party-only policies because younger or newer drivers would choose this as the cheapest option.
This pushed the price of third-party-only policies up, so the trend reversed – and now, fully comprehensive cover is the cheapest.
What else affects your car insurance premiums?
Insurers consider lots of things when they work out how risky you might be – and the more of a risk you pose, the higher the price of your car insurance will be. Considerations include:
- Your location: Some postcodes may have higher rates of theft or vandalism than others. Those living in London, for example, pay on average £807 for their yearly premium, whilst those in Scotland pay only £4925
- Your job: Insurers might see some jobs as higher risks, especially if they involve driving a lot of miles or being around heavy machinery
- Your mileage: The longer you spend on the road, the more likely you are to be involved in an accident. If you drive infrequently, you could save money with the low-mileage cover
- Your car makes and model: Cars in higher insurance groups usually cost more to cover. Find out which car insurance group your car is in with our car insurance group tool checker
- Your car storage and security: Garages, driveways and carports generally reduce the risk of theft or vandalism
- Your driving history: This includes any driving convictions you may have as well as any claims you’ve made on car insurance policies in the past
- Your voluntary excess: Volunteering a higher excess fee tells insurers you’re less likely to make frivolous claims for low amounts
- Any other drivers on your policy: If you’re younger than 25, you might find adding a more experienced driver to your policy brings your premiums down
Additional car insurance coverages.
Although these may not be required, they can provide you with an extra layer of protection. These coverages normally take care of damages and/or injuries to you.
In general, here are some optional coverages:
- Medical coverages
- Emergency roadside assistance
- Rental reimbursement
- Mechanical breakdown insurance
A few things to think about here would be would you be able to pay to repair or replace your vehicle if it’s damaged from an accident? Would you need a rental while your car is being repaired due to a covered accident?
If you own a car, you need auto insurance. A car insurance policy helps provide financial protection for you, and possibly others if you’re involved in an accident. All it takes is a few minutes to get a personalized car insurance quote with the best rates, discounts, and options available to you.
How Auto Insurance Works
In exchange for paying a premium, the insurance company agrees to pay your losses as outlined in your policy. Policies are priced individually to let you customize coverage amounts to suit your exact needs and budget. Policy terms are usually six- or 12-month timeframes and are renewable. An insurer will notify a customer when it’s time to renew the policy and pay another premium.
Regardless of whether they mandate having a minimum amount of auto insurance, nearly every state requires car owners to carry bodily injury liability, which covers costs associated with injuries or death that you or another driver causes while driving your car. They may also require property damage liability, which reimburses others for damage that you or another driver operating your car causes to another vehicle or other property.
A number of states go a step further, mandating car owners carry medical payments or personal injury protection (PIP), which reimburses medical expenses for injuries sustained by you or your passengers. It will also cover lost wages and other related expenses.
Uninsured motorist coverage reimburses you when an accident is caused by a driver who does not have auto insurance3. Underinsured motorist coverage is designed to protect you when you’re involved in an accident with a driver who has some insurance but not enough to cover the full cost of a claim.
Who Does Auto Insurance Coverage Protect?
An auto insurance policy will cover you and other family members on the policy, whether driving your car or someone else’s car (with their permission). Your policy also provides coverage to someone who is not on your policy and is driving your car with your consent.
Personal auto insurance only covers personal driving. It will not provide coverage if you use your car for commercial purposes—such as making deliveries. Neither will it provide coverage if you use your car to work for ride-sharing services such as Uber or Lyft. Some auto insurers now offer supplemental insurance products (at additional cost) that extend coverage for vehicle owners that provide ride-sharing services.