Car insurance FAQ

Why car insurance is mandatory?

Car insurance is mandatory in most states because it is used as a financial regulator for car accidents. A driver's car insurance policy is used as a proof of financial ability to meet the liability caused during the accident. The costs of damage and injuries inflicted during an accident can be more than a typical car owner can handle. So in order to eliminate the risk of the costs being unsettled car insurance has been made a legal requirement for operating a vehicle.

What parts of car insurance are a must and what aren't?

The law requires only a part of car insurance policy as mandatory, namely the third party liability portion, which includes property damage and bodily injury coverage. All other coverage types are purely optional. However, if you financing your car through a loan it is likely that the lender will also require collision and comprehensive coverage to be included into the policy as well.

What affects the rates I'm charged with?

There are a lot of factors that can affect your premiums and each company tends to use different formulas when calculating them. Yet, the standard package of rate-influencing factor is mostly the same and includes such things as your car make and model, engine volume and top speed, security features and safety ratings, theft rates and repair costs, your marital status and education, place of residence and yearly mileage, credit rating and driving record. There may be other factors that can seriously affect your rates that a particular company may put in use.

Does it matter where I live?

Yes, your place of residence can seriously affect the rates you'll be charged with for having car insurance. The rule of thumb is the larger is the city you live in the higher your premiums will be. The logic here is pretty simple. In large metropolitan areas with heavy traffic and a large number of cars the risk of having an accident is much higher than in rural areas with low traffic. So there can be a big difference in rates depending on where you live.

How can I save on car insurance?

There are two ways to save on car insurance. The first one is stripping your policy to the bare minimums in order to get the lowest premiums possible. The second one is shopping around in the first place to get the most competitive policy. Of course it's always wiser to shop around first rather than try to cut down your costs after buying the policy.