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Motor Insurance Made Simple
By plrprousers | January 5, 2010
Car insurance exists to protect you financially in the event of an accident, whether or not it is your fault. It is a mandatory and necessary expense if you own or drive a motor vehicle. You need a good car insurance policy for the financial protection it will afford you in the event of an automobile accident.
Repairs to your own car after an accident, legal fees and liability for property will often not be covered by a bog-standard car insurance policy. Bolt-on niche insurance products such as inconvenience cover, gap insurance and even legal protection insurance can prove to be invaluable additions to your comprehensive car insurance to ensure an accident does not end up costing you more than you can afford should the worst happen.
Choosing the right car insurance will protect not only you, but your vehicle, and third parties in the long run. If you plan to drive, you must be able to prove that you have purchased car insurance. There are different levels of cover which are determined by the type of car insurance policy you choose to take out.
WHY YOU SHOULD SHOP AROUND FOR NEW CAR INSURANCE
Shopping around for car insurance is very important for several reasons:
• You may find better quotes
• Effects of car depreciation
• Your personal circumstances may be different
• Your car finance may put your car at risk
• You could find a policy which includes cover for loss of personal items
• You may find a policy which includes breakdown cover
• You could find a policy which includes legal cover
• It may be possible for an insurer to also cover a second car
• You may be offered an introductory discount
Just because you have used the same insurance company or insurance broker for several years, does not mean you are getting the best deal. It doesn’t always follow that the same company or broker can offer you the best deal for your insurance.
If your broker manages your entire insurance portfolio then he is in the best position to get you the best deal, as he already has information about your demands and needs. This is also the case with car insurance as they can often consolidate your insurance needs into an all inclusive package which most insurance companies only make available to brokers.
Your car will depreciate in value according to both age and usage. Car depreciation starts as soon as you drive it away from the car dealership. Your car’s value will decrease every year. You should get a reduction in your premium to reflect this. This makes perfect sense. For this reason you should make sure that you have your assumed car’s value checked against its current blue book value as opposed to against the purchase price. The reason is that even fully comprehensive car insurance policies do not cover a vehicle to the purchase price, but rather the blue book value. Your declaration concerning the value of the car should be as accurate as possible. The more expensive a car is the more it can cost to insure. You may be lucky enough to find a policy which offers to replace your car with the same of similar following an accident, but this is not usually the case. There is however an insurance product called Vehicle Replacement Insurance which does just that! To find out more about how Vehicle Replacement Insurance works click on the link.
Your personal circumstances may be different that at your last renewal. You may have switched jobs and not drive as many miles per year or have paved the front lawn and turned it into off-street parking. Get insured according to any changes in circumstances – no matter how small you think they are. If you drive fewer miles your insurance company will recognise the decreased risk and your premium will be reduced accordinglyIt’s not always as expensive as you may think to add additional drivers to your existing policy – particularly if you wait until renewal time. Adding additional drivers mid-year often incurs administration fees which could be avoided if done at inception or renewal time.
SO WHICH IS THE BEST CHOICE OF CAR INSURANCE COVER?
There are three different types of cover available in the UK.
1. You must by law have the minimum of Third Party Insurance in many countries, including the UK. It provides coverage to any third party involved in an accident with the insured vehicle including passengers. Third Party Insurance acts as security against liabilities for damage to another person in a vehicle accident. Third party insurance will not cover any damage inflicted on your own car or to your person. There is no reimbursement of repair costs with this type of insurance.
2. Third Party, Fire and Theft Insurance will cover the benefits of third party insurance and includes any financial loss to the insured vehicle caused by fire or theft. The average driver may find this the best type of cover, especially for a vehicle which doesn’t have a very high market value. If you are leasing a vehicle or have acquired it via a finance company, then you will need to provide fully comprehensive insurance for the vehicle.
3. “Fully Comp” will give you the widest insurance cover for your vehicle.It provides the basic insurance of third party, fire and theft and covers damage to the insured vehicle and any bodily injury suffered by the policyholder in an auto accident. If the vehicle value is higher than the insured can afford to pay to replace it, then fully comprehensive is the preferred choice. There are specialised insurance products like Finance Gap or Vehicle Replacement Gap which can top up the gap between what your insurance company will pay out and the cost of getting a new car – you can find out more online by doing a simple search.
Many factors affect car insurance and most insurance companies offer a range of secondary covers to meet the varied and specialized needs of the policyholder.
FACTORS AFFECTING CAR INSURANCE
1. The Policyholder
• Age of the policyholder
• Gender of the policyholder
• Are you married or single
• The area you live in
• How large the car and engine are
• Vehicle replacement cost
• Any modifications that have been made to the vehicle by its owner
A younger less experienced driver will pay a higher insurance premium than someone with several years driving experience.
A married personis considered more responsible for their actions than a person is with no commitments. It stands to reason that married men with kids have more responsibilities than single men and the insurance companies therefore consider married men a lower risk category.
Where a person lives also affects the insurance cost. If you live in the country or in a low crime rate location you are likely to get a lower premium than if you are a city-dweller.
A powerful car is more likely to lose control at the hands of younger drivers: expensive cars cost a lot to replace if scrapped and should they simply require repairs the sum of the replacement parts often costs more than the used car’s value, making more powerful cars very expensive to ensure.
Modifications are more likely to alter the vehicles safety; performance is improved, and handling may be compromised making the vehicle more unpredictable. Car modifications therefore equate to increased risk for insurance companies, and will result in increased premiums.
2. Driver History
• Years of driving experience
• Claims history
• Driving convictions
• Annual mileage
The number of years a person has been driving suggests their understanding of the rules of the road, shows the driver has built up experience of driving under varied driving conditions and has attained a certain level of confidence while behind the wheel. Certain assumptions and associated levels of risk are made according to the number of claims made in the previous five years. Driving convictions such as speeding, hazardous driving or driving while intoxicated will affect the premium. Parking violations are not included.
Your annual mileage is a factor too. Your chances of being involved in an accident are increased the more time your car spends on the road.
3. Vehicle History
• Current vehicle value
• If you own the vehicle, or is it leased or financed
• Car make and model
• Size of engine and performance category
• Modifications to the vehicle
If the vehicle has a low book value, it may not seem to be cost effective to pay for comprehensive insurance; however this is not necessarily the case. If the named driver has several years no claims then fully comprehensive insurance could actually cost the same as third party fire and theft cover, but with additional perks such as windscreen cover and legal assistance etc. When buying online you may find that additional benefits can be included at little increased cost to you. If you are leasing a vehicle or have acquired it via a finance company, then you will need to provide fully comprehensive insurance for the vehicle. This is so that they can be reimbursed for any damage caused to the car by the policyholder. This will be covered if you have fully comprehensive insurance.
There may be other benefits included in your car insurance policy, which are not always necessary but sometimes advisable:
• Breakdown insurance
• A courtesy car could be offered while yours is being repaired
• Roadside and/or breakdown insurance cover
• Help with legal fees and advice
• Windscreen cover – repair or replace
• No Claims protection
• Compulsory or voluntary deductible amount
Choosing the correct insurance and getting the best quote can be daunting as there are so many variables to consider. Minimise your aggravation by only visiting user-friendly insurance sites. Consider using an insurance aggregator website for your initial quotes. They are fairly easy to use. As the buyer you only need to answer the questions once and they will search the insurance market for you. Once they have collected all the quotes, you will be able to compare insurance policies against each other, save and email your quote to your personal email address, go back and change your options to include or reduce the benefits you may be considering and – when you’re happy – buy online. Before you commit to a purchase it’s a good idea to first tell your broker the results of your search to see if he can get you a better deal. Remember that you need to compare quotes on a like-for-like basis. It could be more complicated than you at first think. Good luck on finding the best policy for your needs.
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