Every driver basically knows about liability insurance because in most states you are required by law to have it. If you’re in an accident, liability insurance covers any damages you have may have incurred by hitting another person’s vehicle. This includes both their medical bills and their automobile repairs. Liability insurance is great because it can stop someone from suing you for these expenses and in the process taking everything you own, including your house.
What liability insurance doesn’t do is pay for the damages to your car if you are in an accident that is your fault. For this type of coverage, you would need to buy physical damage insurance. If you have an expensive car that would be hard to replace, you may want to consider buying physical damage insurance. The two main factors that determine your premiums are:
· Actual Cash Value (ACV)
· Insurance rate
Actual Cash Value refers to the value of the vehicle if you were to try and replace it in the current marketplace. Insurance rate is a variable percentage rate that is calculated in terms of variables such as a person’s driving record, the area they drive in, and how many miles they travel on an average basis. Insurance underwriters use this information to determine an insurance rate. This rate is then multiplied with the Actual Cash Value, and the sum becomes your annual insurance premium.
The main reason you get a high insurance rate is because of your driving record, particularly if you have been in multiple accidents and have too many moving violations. One of the ways you can sometimes reduce your premium is by taking a higher deductible. As with medical insurance, physical damage policies come with a deductible that must be met in for the policy to go into effect. Higher deductibles usually mean lower insurance rates, but that is up to your insurance broker and the insurance company’s underwriters. For more information on car insurance, see the article, Finding the Best Car Insurance for Your Needs.