Auto Insurance

The modern man relies on automobiles for everything. Supposedly, people spend more than 10% of their life in cars. Unfortunately, with so many people driving around at all hours of the day, accidents are unavoidable. These accidents can lead to both personal injury and financial difficulty. That’s why automobile insurance is necessary.

In the USA, all drivers need auto insurance. This requirement allows insurers to reward better drivers and penalize careless ones. It also means that major changes to car insurance are matters of national concern. This brings us to the matter of the recent rise of insurance rates. This jump in price has many citizens perplexed. Therefore, today we’ll discuss how this jump came about. However, to understand the rise in rates, some basic knowledge is necessary.

How Are Rates Determined?

As mentioned earlier, every driver in the United States must have automobile insurance. However, few people know how insurance prices are calculated. In most cases, your level of risk determines your insurance price. High risk means you’ll probably be more expensive to insure. Low risk means you’ll be cheaper to insure. There are three things insurers use to determine risk. These components are: Demographics, Car Usage, and Financial History.

Few people know that demographics play an important role in calculating risk. For instance, people who have been driving longer get into fewer accidents. Therefore, elderly drivers receive lower rates. Also, male drivers are bigger risks than women. They receive higher rates too. Furthermore, those who live and drive in urban areas with high traffic will receive higher rates than others.

Most people know that their driving history affects their insurance rates. What most people don’t realize, however, is that their current driving plans also affect these rates. For instance, drivers with low mileage are less likely to crash. Therefore, such drivers receive lower rates.  Drivers with high mileage are more likely to crash. They receive higher rates. In addition, those who own cars that are more likely to be stolen also face higher rates. There have been many reports of lottery winners buying sports cars and being ruined by the insurance rates that followed.

The most overlooked (by drivers) component of risk determination is Financial History. In truth, one’s credit history as important as one’s driving record. In addition, certain jobs are riskier than others. People in these jobs receive higher rates. Some high-risk jobs are: Doctor, lawyer, and business executive.

The Big Picture

Now we know how we get individual insurance rates. This means we can now look at the whole insurance industry. According to J.D. Power, the “annual rate increase of more than $200 per vehicle has more than doubled during the past four years”. This sudden rise in rates means that auto insurance is more expensive than ever.

However, this rise in rates isn’t because of greedy corporations. Instead, many different things cause the rise in rates. The most important of said things are: More costly accidents and global warming. These things increase the cost of insuring customers.

You heard that one right; global warming is to blame for rising insurance rates. Specifically, the weather caused by global warming is to blame. Unfortunately, global warming has nasty effects upon the weather. This has led to more insurance claims in the past few years than the industry has ever faced before.

At the same time insurance companies are dealing with this, they’re also facing a rise in fatal accidents. Fatal accidents are, of course, very expensive, as the insurer must pay the victim’s family for their loss. Such accidents may even make insurer pay for funeral costs.

What This Means For Us

The factors mentioned above (as well as a few others) make it far more difficult for insurers to turn a profit. Their response to these changes is raising the rates. Unfortunately, that means we as citizens must foot the bill for problems we have no say in.

However, there is still hope. We as Americans can solve any problem by making it public. To remove these problems, we must only inform others. An informed nation is a strong nation. We can work together to remove said problems. By doing so, our future will become brighter.

Who is secured by auto insurance and under what circumstances?

Your auto insurance policy covers you and other family members under your plan. Regardless of whether you’re driving your car or someone else’s. Additionally, your policy also provides coverage if someone who is not on your policy is driving your car. But this person needs your permission to operate the vehicle.

The auto policy you own only covers personal driving. Despite whether you are commuting to work or taking a trip. You insurance will not provide coverage if you use your car for commercial purposes. For example, delivering pizza. Moreover, coverage will also be neglected if you use your car to provide transportation to others through a ride-sharing service such as Uber or Lyft. However, some auto insurers are now offering supplemental insurance products. This extends coverage for vehicle owners providing ride-sharing services.

Is Auto Insurance Mandatory or not?

Auto insurance conditions are different for each state. Nonetheless, your lender may have his own requirements if you’re financing a car. Below is a list of what car owners want you to carry in every state:   

  • Bodily injury liability – This covers any costs that deals with injuries or death that you or another driver is responsible for while driving your car.
  • Property damage liability – Reimburses others for the damage caused by you or another driver operating your vehicle. Accidents include hitting other vehicles or property such as a fence, building or utility pole.

Furthermore, other states require that you to bear:

  • Medical payments or personal injury protection (PIP). This provides reimbursement for medical expenses that involves injuries to you or your passengers. In addition, lost wages and other expenses are also paid off.
  • Uninsured motorist coverage reimburses you when an accident involves a driver who does not have auto insurance. For instance, a hit-and-run scenario. You can buy uninsured motorist coverage as well. This will pay off the amount that another driver lacks to pay during a serious accident.

Therefore, consider adding PIP and uninsured motorist coverage to your policy for greater financial protection.