Car Insurance: Are You Covered?
1. What does collision insurance cover?
Collision insurance coverages damage to your car when you have an accident. If you hit another vehicle that damage is paid for by property damage liability, not collision insurance.
2. Comprehensive coverage pays for which of the following:
Comprehensive coverage pays for damage to your vehicle due to incidents other than accidents. These can include theft or vandalism, fire, and falling objects such as trees or branches. Comprehensive also generally pays for repairs to your vehicle for one specific type of accident — if you hit an animal.
3. What is a “deductible” on your auto or health insurance policy?
Your policy’s deductible is the amount of money you pay out of pocket before your coverage begins. Deductibles are generally applied per incident, if you had a tree fall on your vehicle and were also subsequently in a separate accident, you would have a deductible for each claim.
4. Which statement is true regarding state-by-state insurance requirements?
Nearly all states have laws requiring minimum liability coverage requirements. The few states that don’t specifically require you to have insurance do require you to prove you can afford to be financially responsible for damage you might cause.
The interest of the states is protecting others from damage you might cause, hence they require you to either have liability insurance (most cases) or to demonstrate financial responsibility. Collision insurance protects against your loss and isn’t mandated by states.
5. What is “gap” insurance for a car?
Gap insurance covers any shortfall between the value of your car and the amount remaining on your loan if the car is a total loss. Cars, especially new ones, depreciate rapidly. If you borrow most of the cost of a car, there will typically be a period where you owe more on the car than the car is worth. This is frequently referred to as being “upside down” on the loan.
If your vehicle is a total loss, you could receive less from the insurance company than you owe the lender. This is the purpose of gap insurance, it covers that gap, the amount you might still owe after the insurance company paid you for your car if it were a total loss.
6. Which of the following may entitle you to a discount on your car insurance?
All of these may entitle you to a discount. It will depend on your specific situation and your insurer. There are also other things that may entitle you to a discount, such as a good driving record.
7. What elements of your insurance policy can you control or select?
You can generally choose both the level of liability coverage your policy provides and the deductibles for your comprehensive and collision coverages. In most states you are legally required to have a minimum amount of liability coverage, you cannot select a lower amount. Often, lenders will stipulate maximum deductibles for comprehensive and collision coverages if you have a loan on your vehicle. While it may be tempting to raise your deductibles to lower your premium and save money, it is important to be careful not to raise them so high that an accident could cause you financial trouble.
8. Who will likely pay the most for car insurance, assuming none of them have had any accidents?
Age, gender, and marital status affect auto insurance premiums. Males have more accidents and make more claims; hence they pay higher premiums. Younger people have more accidents than their more mature counterparts, hence younger people pay higher premiums. And married people make fewer claims than single people do, they get lower premiums.
In this scenario we know that none of them have had prior accidents – a big risk factor. The youngest male will most likely have the highest premiums.
9. Which factor has no impact on your car insurance rate?
Your salary or earnings do not factor into your auto insurance premiums. All the others listed are risk factors that can increase or decrease your premium.
10. Which car will likely be the most expensive to insure (same driver)?
The sports car is most likely to cost more to insure. Performance vehicles tend to cost more to insure, as do more complex vehicles that cost more to repair. There are significant cost differences even between fairly similar vehicles. Insurance cost is certainly a factor to consider when shopping for your next vehicle.