Besides being a careful driver, one of your responsibilities as a car owner is ensuring that your vehicle is insured. Car insurance is mandatory in most countries, like the US, Canada, and Macau. According to an article by Macau Business, all car owners in Macau need to have at least third-party insurance to use their vehicles. Although everyone knows what insurance is, some people may still need to learn about the specifics of auto insurance. In this article, we will talk about four things you need to know.
They cover vehicle damages no matter who the driver is
If you own a car with auto insurance, don’t be so quick to let others borrow your car, especially if you’re not confident of their driving skills. No matter who's driving, your vehicle is your responsibility. That’s why most people say that auto insurance follows the car, not the driver. However, there will be instances where the insurance follows the driver too. For example, suppose your friend gets into an accident with your car but has personal auto insurance. In that case, their insurance can cover the costs that exceed the limits of your policy’s coverage.
There are different types of auto insurance
Different types of car insurance offer various financial benefits. The most common policies are collision and comprehensive insurance. Both of them provide reimbursements for any damage your car incurs. The difference between them is that collision covers damages from an impact with another vehicle or object, while comprehensive insurance includes theft and incidents other than a collision. Lastly, there's auto repair insurance. Unlike the two previous policies, a guide to auto repair insurance on Sound Dollar explains that it helps you finance major auto repairs for your car. Even if they’re not mandatory, they enable you to manage the financial costs associated with most auto repairs without breaking the bank.
The price of auto insurance varies
The price of auto insurance may also vary from one policyholder to another. Even if insurance companies have different formulas for calculating premium prices, they all use the same factors in determining how much your insurance will cost. It includes the make and model of your car, the purpose of using the vehicle, your driving record, and your driving location. For example, if you live in an urban area with a high crime rate and more traffic, you can expect your insurance to cost more than those who live in rural areas.
There are ways to lower your auto insurance expenses
Auto insurance is expensive, but you can reduce your expenses by raising your deductibles. Finance writer Donna Freedman outlines how deductibles are the amount you must pay before your insurance coverage takes over. For instance, you have a $500 ($3,919 HKD) deductible and $2,000 ($15,652 HKD) worth of damage from a covered accident. Once you've paid the car deductible, the insurer will pay the remaining $1,500 ($11,739 HKD). So the higher your deductibles are, the lower the premium you have to pay to your insurance company. However, this also means that you'll be shouldering most of the cost of the car’s restoration if you suffer from a car wreck. In our article on ‘3 Important Points I Wish I Knew Before I Bought Life Insurance’, we demonstrated why weighing the pros and cons of your options is important in making financial decisions, such as getting insurance. Because these decisions may entail long-term commitments, it’s best to understand why you need them and how to maximize your benefits. When it comes to choosing auto insurance, you should use the same type of approach. Doing so will help you make the most worthwhile decision.