When you purchase a car or any vehicle for that matter, it is mandatory to have insurance. Even though everyone is aware of this and almost automatically gets the insurance, it is true that many are not familiar with the terms used in the insurance policy. The following are the essential terms that you should be aware of:-

Vehicle can be a term for a car, automobile, truck, motorcycle or any other motorized conveyance used to transport people or products.

Coverage for your vehicle refers to the amount and types of insurance you have purchased in accordance with the law, to legally protect yourself and others.

Term refers to the length of time the insurance policy will be in force. It can be as little as one month, but is usually for six months to one year.

Premium is the amount of money paid to the insurance company to obtain vehicle insurance. The amount charged by the insurance company will be determined by the coverage required, owner’s driving record, the deductible agreed upon, and laws of the state.

Basic coverage or PL and PD (Public Liability and Property Damage) means the insurance will pay for damages to vehicles owned by others, or to their property, but will not pay for damages to your vehicle or property. Included in the PL/PD policy is a limited medical coverage in case of injury, as required by law. In many cases, this is $20,000 for one instance, up to $100,000 for injuries to several people involved in a single accident. This is an example of a minimum coverage policy.

Comprehensive Collision coverage is an insurance policy intended to protect your vehicle in addition to those owned by others, in case of accident. The increased coverage will pay for repairs in full, minus the deductibles. Included in the policy will be repairs for glass breakage, fires and other unforeseen accidents. Procuring a comprehensive policy is normally required by loan companies before they agree to finance the vehicle. In a policy of this type, the amount it will pay for medical care expenses are also higher.

Deductible refers to an amount of money you agree to pay out of your own pocket for any repairs required in the event of an accident. Usually the amount is agreed to in advance. When a deductible is arranged between insurance company and individual insured, there is usually a reduction in the cost of the insurance policy. Each time there is need for a repair, the deductible will have to be paid.

Write Off is a term used when the vehicle would cost more to repair than it is worth. If there is a loan on the vehicle, that would be paid out first, minus the deductible. If there is anything left, it would go to the owner of the vehicle to use as they see fit.

Uninsured Motorist coverage means that if a vehicle does not have insurance and is in an accident with another vehicle, the repairs will be covered to the other vehicle. (The injured party in this case.) Prior to having uninsured motorist coverage, any vehicle involved in an accident with an uninsured party would have no coverage. Any repairs needed would have to be paid for out of pocket even though the injured party had insurance, because the accident was not his fault.

Vehicle insurances are mandatory therefore it is wise that you choose the right kind of insurance that works best for you and gives you maximum benefit. You have to set aside some time to really compare insurance rates and coverage before you commit to a company. Some things that you need to look for are:

• How much do they charge for the policy and how does it compare with online companies and
land based agencies
• What is the minimum and maximum premium available
• Is there a monthly payment plan that will help smooth out the budget
• How much does the premium go up at each renewal (sometimes it goes down with a safe driving
record)
• How often do they renew the policy (6 months., 12 months)
• What is the deductible on the policy (each state has a legal minimum required)
• What are the premium savings if the deductible is raised above the legal minimum
• What are the premium savings if life, homeowners and auto insurance are purchased from the
same company (sometimes RV and boat can be also added)
• How do they handle claims (phone, in person, get your own repair estimates, etc)
• Do they use independent claims adjusters (usually more objective)
• How long have they been in business
• Are there outstanding complaints against the company (check with BBB)
• What are their guidelines for insuring a vehicle (age, mileage, value)
• Do they insure under age drivers and how much does that raise the premium
• Do they carry insurance for those with a poor driving record (if so, they may charge a
higher premium for it, or for all policies to cover anticipated expenses)

In addition to having answers to the above, it would be wise to have some answers to questions of the legal requirements for insurance in the state of residence. This information is usually available online, or by telephone directly from the state offices. Do not depend on the insurance company to educate, although they may be willing to do so. Compare the information from the state office with the information supplied by the insurance company.

There are several different options available to the vehicle owner when looking for insurance. Compare rates and coverage sold by online companies, independent agencies that represent several companies, single insurance companies such as Auto Owners, insurances sold through organizations such as AARP(American Association of Retired Persons), loan companies such as GMAC(General Motors Acceptance Corp), banks and credit unions. Using the guidelines above the vehicle owner can determine which insurance is the best fit for their current life situation. It seems like a lot of work to go to, but protecting the finances of the household is of primary importance. Taking time up front to learn and compare can pay big dividends later.

Sensible use of vehicle insurance includes filing claims for large repairs when there is an accident. For smaller things, like a small dent in a door from a careless driver at the mall parking lot, it will be best if you just let it go. This is a costly repair, mostly cosmetic, that does not affect the safety or driving ability of the vehicle. A less costly repair such as a broken windshield should be done because it does affect the safety of the vehicle. That is the criteria. How much will the repair correct a safety or operational factor or the vehicle? The second thing to consider is, if you can fix it on your own for less than the deductible then do not file a claim. Take the long view here. You will probably drive for 50 years, owning one or more vehicles at a time all during those years. A little common sense here could save you a small fortune.

The premium charged semi-annually for vehicle insurance ranges from $300 to $1200 depending on several factors, like driving history. This is a considerable amount of money to most people. The thinking here is to file a claim for every incident, no matter how minor, if the amount to be paid exceeds the deductible. What can happen is that 2 or 3 small claims are filed that seem to get back part or most of the premium paid and then there is a large claim for a serious accident. When it comes time for the renewal notice of the insurance, the driver gets a cancellation notice instead.

Insurance companies continually look at their own financial risk. If it appears that the vehicle and driver insured by them is going to cost more than they are willing to risk, they can simply cancel the policy. One of the questions most insurance companies ask when deciding to insure a new customer is if their insurance has ever been cancelled. Many times they will refuse to insure the vehicle without asking the circumstances of the previous cancellation if any.

If the insurance company has decided to renew the policy for another six months, the premium may well be doubled. The insured may also find the deductible increased and coverage decreased. These factors are all legally available to the insurance company if they believe the insurance is being abused. In effect, the driver is on a kind of probation.

So what good is the insurance? First, consider that if you have a serious accident where damages amount to half the value of the vehicle, having insurance is a wonderful thing. With vehicles costing anywhere from $10,000 to $30,000 on average for a middle of the road car, repairs could equal the cost of the insurance premium for 5 to 10 years. If you have been sensible in your use of the insurance, the premium will probably not increase.

Second, having insurance on the vehicle is required by law and you do not want to break this law. The penalties for doing so are huge, including fines and possibly jail time.

When it is time to purchase car insurance there are several ways to go about it.

In every town or city insurance agency offices are abound. That is their business to sell insurance policies. Quite often, they represent several insurance companies at the same time in order to provide insurance for nearly everyone. Even if there have been previous driving problems there will be insurance available if you can afford the price.

You can conduct the business of obtaining insurance entirely over the telephone and fax machine, if you wish. The insurance agent will require information from you before being able to sell the appropriate policy. The agent will want to know the type of vehicle, including vehicle identification number (VIN), age of vehicle, any special features such as CD player or passenger side air bags, and mileage already accrued if the vehicle is purchased used. The agent will also want to see a copy of your driver’s license so he can verify what driving infractions you may have had in the past. He will ask your age, gender, marital status, occupation and intended use of the vehicle. He will ask if there will be a loan on the vehicle so he can apply for the correct coverage for you. A copy of your insurance coverage is always supplied to the lending institution. After you have supplied the necessary factual information, the agent will look at the policies currently being offered by different companies to get the best coverage for the least amount of money. The agent makes his living by selling policies and that means someone is paying him a commission to complete the sale.

There are several nationwide insurance companies that offer to provide a policy through the internet. They will require all the same information as a land based agency. Their web sites feature encrypted methods to provide privacy to the individual’s personal information. Progressive will furnish comparisons between their rates and most major nationwide insurance companies.

Another way to obtain vehicle insurance is to take advantage of insurance offered to members of certain organizations, such as AARP (American Assoc. of Retired Persons) or the various fraternal entities such as Moose. The amount charged to provide insurance through one of these may be lesser than that by other land based agencies, but more than a huge company such as Progressive. Many times people decide to take this route because a portion of the premium is returned to the organization.

Some lending institutions, such as GMAC (General Motors Acceptance Corporation) will offer to include insurance along with the vehicle loan. This is convenient and the most expensive way to purchase insurance. You will pay up to 40% more for your insurance by using this method of purchase.

Car insurance can also be purchased as part of an insurance package, i.e. you plan to insure the home and RV through the same company.

When purchasing vehicle insurance, there are several choices. Some of the choices will depend on facts outside of the control of the driver. One of these facts concerns the age of the driver. Some insurance providers refuse to insure a vehicle if it will be driven by anyone under a certain age, or over a certain age. Another factor is the number of accidents or traffic citations within the last five years.

Insurance companies try to limit their risk of paying a claim by only insuring those over 25 and under 65 who have none or very little reason to file a claim. That is, no accidents of any kind, or only a small claim for windshield replacement, for example. For a higher fee, some insurance companies will insure older drivers or those with less than stellar driving records.

In most cases, if a vehicle has a lien (loan) against it, the driver will be compelled to purchase full coverage auto insurance. Full coverage consists of collision, health, liability, comprehensive (glass, fire, etc) and uninsured motorist coverage. It may also include road service. A minimum deductible, the dollar amount the driver would have to pay out of pocket for each claim, is set by the insurance company. The driver may have the choice of raising this amount which usually means that the premium will be a bit lower.

• Collision pays for damages to the vehicle in the event of an accident.
• Health pays for medical treatment for the driver and passengers if injured in an
accident while in the insured vehicle.
• Liability pays for damages to property, such as a utility pole, mailbox, etc.
• Comprehensive coverage pays for broken windshields, electrical fires, etc. to the insured
vehicle.
• Uninsured motorist coverage will pay for damage to the insured vehicle in the event of an
accident involving another vehicle that is not insured.
• Road service pays for tow truck assistance in the event of a breakdown.

If the vehicle is owned outright, the driver has the choice of providing insurance coverage that will include liability and medical up to the limits set by law, and nothing more. The insurance company will still set a deductible, which can be raised. For just a few dollars, the driver can add in uninsured motorist coverage. A wise choice, usually, that provides protection if the other drivers involved in an accident have no or too little coverage themselves. This is minimal coverage and is usually chosen when the vehicle is worth little.

Many vehicle owners decide it is worth the higher premium to have full coverage, even though there is no loan. They may also include coverage for a rental car if they find themselves without a vehicle due to an accident, until repairs are completed. This is referred to a loss of use coverage. This is valuable when the insured vehicle is fairly new or is the only transportation to get to work.

Motor vehicle insurance is vital for the protection of yourself, your vehicle, other vehicle drivers and private property belonging to other people. If you are involved in an accident, no matter who is at fault, lack of insurance will automatically bring about a huge fine and possibly some time in jail in most states.

In most cases when applying for a vehicle loan, proof that you have full coverage insurance is demanded before the loan is approved. Unless you have cash to pay for a vehicle outright, you will not be able to purchase it unless you have valid insurance.

After ownership is established, you still will not be able to drive it legally until you have purchased a license plate. To get the license plate, you must show proof that you have insurance on the vehicle.

The license plate is issued by the state in which you reside. A fee is charged by the state for the license plate. (It is renewed at least once a year) The fee is in addition to the cost of the insurance. The numbers and letters on the plate are registered to the vehicle and to you. There is usually a fee to register the plate which is in addition to the cost of the plate and the insurance.

In the instances where you have a license plate from a previous vehicle, most states will allow a change in registration from the previous to the current vehicle, for a fee of course. It will cost a little less than having to purchase a new license plate and pay for the registration. You must still furnish proof that you have insurance. The license plate is then fastened to the vehicle, usually in the back, and signifies that this is a legally insured and registered vehicle. Some states require a license plate in both front and back of the vehicle.

If you are involved in an accident, the investigating agency, state, county or city police will immediately check the license plate to see if it matches the vehicle, the person driving and to see if there are any other legal actions pending that need their attention, such as an outstanding arrest warrant. They will ask to see the insurance papers that should always be in the vehicle. Most people put them in the glove box for safe keeping. If the insurance papers are missing, even if the coverage is current, the driver will be facing a large fine and possibly jail time upon failing to produce them.

Most states take vehicle insurance extremely seriously. You do not have to have had an accident to get in trouble. If you are stopped for any traffic infringement, be it speeding, running a red light, or even changing lanes without a signal, it can trigger the request for insurance and registration papers. The fines levied will be for the traffic infringement and for lack of insurance. You could be facing fines close to $1,000.