What is it and why do I need it?
Insurance is what covers damages in the case of an accident. Damages may include vehicles, fences, and injuries. Maintenance and mechanical problems are not covered by insurance. Making monthly payments will always be less expensive than being on the line for repairing the brand-new sports car you rear-ended.
Each state requires every vehicle operating on the road to have liability insurance with certain minimum limits. This protects other drivers on the road as well as the owner of the vehicle from lawsuits and expensive repairs.
When you obtain a loan to purchase a vehicle, the insurance requirements expand from just liability to physical coverage, or comprehensive and collision coverages. This is the coverage that will repair the owner’s vehicle when the damage is the fault of the owner.
What are the first steps in getting insurance?
The information needed to obtain insurance includes:
- Names, dates of birth, and driver’s license numbers of all drivers.
- Physical and mailing address
- Year, make, model, and VIN of each vehicle
- Desired coverages
Insurance on a vehicle can only be obtained by the registered owner and household. However, all frequent drivers should be listed on the policy. A policy should only include the vehicles of the household. Friends and neighbors should obtain their own insurance.
Find the company with the best rate for you. Insurance companies use vehicle and driver information including driving records and credit scores to determine a premium. Some companies have better rates for scenarios than others. Working with an independent agent is a great way to find a good company with a variety of options.
What options are available?
Coverage levels may be selected based on desired protection, however, the insurance company determines the rates and makes the offer which the applicant may accept or reject.
Individuals may choose the desired coverages and limits at or above the requirements of the state or lienholders. And of course, the company with which the insurance is provided is limited by the companies that will accept the risk within their criteria.
The state requires a minimum limit of liability insurance. However, that limit will not cover the cost of replacing a new car, let alone more than one vehicle that might be involved in an accident. We like to recommend higher liability limits as extra protection against a financial burden following a serious accident.
Physical coverage is required on financed vehicles to protect the investment of the lender. This coverage is measured in levels by the deductible. The deductible is what the owner pays before the insurance will cover damages in a claim. A higher deductible results in a lower premium. However, lienholders often have a maximum deductible allowed.
Additional coverages are available such as roadside assistance, rental reimbursement, and loan gap coverage. Talk to your agent about the best options for you.