Every time you pay your car insurance premium, be it monthly or annually, you probably do so with a heavy heart. It’s hard to pay up for an accident that hasn’t happened yet, and may never happen. On the flip side, if that accident does take place, you’ll be delighted to have your insurance company footing the majority of the bills.
When you pay for insurance, it’s kind of like placing a bet. You are betting that you might get into an accident at some point, while the insurance company takes lots of bookings and is betting that the majority of people will not have accidents. The pooled money of everyone that has insurance through your company will come to the rescue when one of you has an accident.
Even after knowing all of that, have you always wondered why full coverage car insurance is so expensive? If you’ve ever looked at the difference between minimum liability and full coverage, then you’ve noticed there is quite a difference in price. We are about to break down for you what determines that cost and why full coverage is more expensive.
What Full Coverage Auto Insurance Actually Covers To Make It Worth The Price Tag
There isn’t actually a “full coverage” auto insurance policy. Full coverage is industry jargon that means a customer has all three of the main types of auto coverage; liability, collision, and comprehensive. While the state laws only demand liability insurance, if your car is financed through a bank, then you’ll be required to take out full coverage. Even if you paid off your car in full, if the car is worth money and you have assets to protect then your safest bet is full coverage insurance.
According to the National Association of Insurance Commissioners, the average full coverage insurance policy in America is $1099 a year or $92 a month. What you’ll actually pay will vary greatly by where you live, what you drive, and other personal demographic facts. As a general idea, though, the average breaks down like this:
What is full coverage actually worth, besides money? It’s worth your peace of mind, knowing that if the worst-case scenario does happen, you’ve covered financially. This is even more important as your family grows and you need insurance that protects multiple people, including teen drivers.
Knowing that you’re getting the best deal possible can making paying that auto insurance bill a little easier. That’s why it is important to shop for the best deal and keep educated on what factors impact the cost of your insurance premiums.
Having full coverage means that you have the following types of protections:
Liability: Covers Costs Of The Other Party In An Accident You Cause
Suppose you want to drive in any state in America legally. In that case, you have to carry minimum liability insurance or in some cases just be able to prove you can cover the costs of an accident. Most states have a minimum liability amount on the law books. Keep in mind, if you carry only liability insurance that means if you cause an accident and your car is damaged you won’t receive any help paying for its repairs. Liability claims will only be paid out to the party you hit in the accident. Additionally, if you carry only the minimum amount of liability and you hit an expensive car or cause an accident with serious injuries or fatalities, it’s not going to be enough to protect you from further lawsuits.
Collision: Covers Your Personal Costs After An Accident You Cause
Collision insurance isn’t mandatory by state law but is almost certainly required by any bank that loans you money to purchase a car. It’s also just a good idea to protect yourself and your assets. In the simplest terms, collision damage pays claims to you after an accident you cause. Remember, liability only pays the other party, and collision is what will pay you. There’s a little more to it than that, however. Here are the main things collision coverage will take care of:
-Claims related to an accident you cause with another car
-Claims related to your car hitting an object like a tree
-Another driver hitting your car who doesn’t have insurance or enough liability to cover all costs
If you were still making payments on a brand new car and totaled it in an at-fault accident without collision insurance, you’d still owe the bank the full amount for a car you no longer can drive.
Comprehensive: Covers Your Costs For Most Non-Collision Damages To Your Car
Collisions aren’t the only dangers your car faces. Comprehensive coverage is the catch-all that protects your car from theft, vandalism, and damages that aren’t caused by accidents. These are the things typically covered by comprehensive insurance:
-Weather and Natural Disasters
-Vandalism / Riots
-Damage that is done by animals
All three types of insurance working together are referred to as “full coverage.” They are all subject to deductibles and limitations that you can raise or lower to balance mitigating your risk with what premiums you are willing to pay.
How Insurance Companies Decide What Premiums You’ll Pay
Insurance is all about risk, so calculating your insurance premiums is a very personal experience. Insurance companies use statistics and risk tables to determine how much risk they are willing to take and how much they should charge for it. Each company weighs risk a bit differently, but there are some key factors that influence everyone’s premiums. Some will make complete sense, and others might be surprising. Let’s take a look at what key factors influence your car insurance premiums for full coverage insurance.
Vehicle (Make, Model, Year)
Your car is one of the major components that is being insured, so of course, it’s value will have a lot to do with your insurance rates. The more valuable the car is, the more it raises your premiums. Newer cars, luxury cars, and vintage classics are all quite costly to insure. If you are in the market to buy a new car, you can call your insurance agent to see how your current rates will be impacted.
Geographic location not only refers to what region or state you are in, but it goes all the way down to what zip code you reside in. Your geographic location is linked to the type of weather conditions you might experience, how many accidents occur in your area, how many people are on the road, and more.
Age of Driver (And sometimes gender)
Experience behind the wheel matters, and younger drivers, especially new teen drivers, will experience much higher premiums because they cause the most high-dollar accidents each year. Middle-aged drivers are seen as the least risky and will have better rates. Senior drivers might see an increase due to the amount of smaller claim accidents their age group can rack up. Some states allow gender to be a factor in premiums as well, while other states do not.
Getting married is a huge milestone in anyone’s life for many reasons. It is also a sign of maturity, and statistically, married people are more careful drivers. You can enjoy lower rates when you get married and take advantage of family plans that can reduce your overall insurance costs.
Driving Record / Claims History
Even one accident will raise your premiums by quite a lot. If you have tickets for speeding, reckless driving, or a DUI, then you will also see higher premiums and might even have trouble getting or keeping a policy. Avoiding accidents and citations should be of high importance to you for your own safety as well as keeping insurance rates low.
This one might surprise you, but your credit score impacts your insurance rates and your ability to obtain coverage in the first place. Statistically, people with poor credit cost insurance companies more in claims. If you have exceptionally poor credit, you might get rejected by traditional insurance companies and have to go through a company that specializes in high-risk drivers. If you are like most Americans with an average score, you can boost it up by paying down balances and making sure all your minimum payments are made on time.
A lapse in coverage can make it hard for you to get insurance again or make you pay higher rates. It’s always a good idea to keep some form of insurance active at all times, even if you don’t own a car for a while. You can get non-owner insurance at a lower rate.
Miles Driven Annually
The more your drive, the more you risk an accident. If you don’t commute to work or have a car in storage, make sure your insurance company knows this, as it could lower your rate.
Coverage Selections And Deductibles
Liability is cheaper than full coverage, but it is considerably more risk for you. There are also other add-ons like rental car insurance, roadside assistance, and gap coverage you can elect to take out for an additional fee. You can also select how low or high or a deductible you are willing to pay for claims. A deductible is an amount you pay out of pocket before insurance kicks in on a claim. If you choose a higher deductible, then you will have lower premiums.
Finally, each company has a set of discounts based on what type of clients they are trying to attract and what risk model they are working with. When you compare rates, make sure to factor in any available discounts you could take advantage of. Discounts can come from your profession, safe driving, good grades, pre-paying premiums, and other types.
These factors will determine how much your premiums are, no matter what type of policy you are taking out. Of course, the better the policy, the more experience it is. If the insurance company is taking on more risk, they will charge you more accordingly. You can help lower your costs by increasing your own risk by increasing the deductible you are willing to pay if an accident should happen.
Specific Examples Of Why Full Coverage Insurance Is More Expensive (But Worth It)
Let’s say you are driving to work one morning, a little rushed because you are running late, and you accidentally rear-end another car from driving too close. Both cars were damaged, but luckily nobody was hurt. Let’s say each car has around $1,000 of body damage to repair.
If you have liability only: The party that you hit will make a claim to your insurance and will get their repairs paid for. Unfortunately, you’ll be stuck paying for your own damages, so that whole $1,000 is coming out of your pocket. The insurance company is only paying for half of the damages.
If you have full coverage: Both parties get to turn in claims. You’ll have to pay your deductible, but your insurance will pick up the rest. In this example, the insurance company is picking up most of the tab, or double the amount. Now you can easily see why full coverage costs more in premiums, and it puts a lot more risk on the insurance company.
A rough hail storm pelts your brand new Escalade with softball-sized welts. It isn’t pretty, and the damages are close to $10,000.
If you have liability only: If you were blessed enough to pay cash for this nice car and took out liability only to save on premiums, you’ll be getting no help at all from your insurance company. The damages will have to come out of your own pocket.
If you have full coverage: If you took out a loan for this vehicle and got yourself full coverage then you’re in luck. After you pay a deductible, the rest of the tab will be paid by your coverage. In this example, the insurance company went from paying nothing at all to paying close to $10,000. This is another great example of why full coverage insurance costs more to carry.
Do You Need Full Coverage Insurance?
While not everyone needs full coverage, it’s safe to say that more people need it than don’t. How can you determine if full coverage is necessary for you? Take a look at the following factors to help you decide.
Are you still making car payments?
If you used a loan to buy your car like many of us, then your bank will require full coverage to protect their investment. Maintaining full coverage is often an obligation you agree to when you finance a new or used car.
If you own your car free and clear, can you afford to replace it if it gets stolen or totaled?
Cars are expensive. Even if you paid for your car in full and no longer have a responsibility to a bank, having full coverage is probably still in your best interest. Unless you are very wealthy, you probably can’t buy a second car if this one is damaged without insurance help. Car repairs can also be very costly, and you’d have to pay for those as well unless you opt to carry full coverage.
Is your car really expensive?
The more expensive your car is, the more you need full coverage to protect it. If you have a luxury car or a classic vintage car, then you’ll want to have as much coverage protection as you can afford.
Do you do a lot of driving? What are the road conditions?
The more time you spend on the road, the more likely you are to be in one or more accidents in your life. If there is a lot of severe weather where you live, then full coverage protection makes even more sense for you.
Who is at fault for accidents in your state?
In some states, the fault is assessed on a sliding scale. You might be found 60% responsible for an accident, and if you don’t have full coverage, you could end up paying 60% of the bills even if the accident wasn’t fully your fault.
In most cases, carrying full coverage is worth the extra premium payments. Not only are individual cars expensive, but property damage and medical bills are extremely expensive and only getting higher in cost. Accidents with fatalities are even more expensive, and you don’t want to be involved in one of those without the most insurance you can afford.
How To Find The Cheapest Rates For Full Coverage Auto Insurance
A lot of small and big details go into calculating an individual’s insurance premium. Your quote for the same coverage with the same company will be different from your next-door neighbor’s quote. In order to figure out what your rate will be, you need to get quotes from several companies and compare them. Comparison shopping is the best way to figure out which company has the best deal for you. It should be done when you buy insurance for the first, any time you change insurance, and about once a year just to make sure you still have the best deal.
Not all companies calculate rates the same. For example, here are some national averages for different competitive companies for nearly identical drivers:
Some companies require a membership to join and others require military service like USAA. When you compare quotes, make sure you are comparing the same types of policy with the same deductibles and limits. Otherwise, you could be comparing apples to oranges.
If you don’t like the rates you get quotes, there are things you can do to help get a better deal. You can raise your deductible or pre-pay your insurance. Pre-paying means you pay in one annual lump sum instead of monthly. For long-term savings, you can work on improving your credit score and maintaining a safe driving record.
Have your insurance agent or broker help you take advantage of all the discounts you qualify for and work towards ones you can obtain. If you’ve had an accident or tickets, keep in mind these stay on your record for around seven years. It is worth it to check your rates each year in case any of these black marks are removed from your record.
If you experience temporary hardship, do not let your insurance lapse. Not only is it illegal to drive without it, but a lapse can also make it more expensive to get later. Call your insurance company to work out a payment plan. Many people experienced this recently in 2020 due to the COVID pandemic. Insurance companies worked with their customers to help keep them insured. It’s important to remember that while insurance seems like “a necessary evil,” your insurance company is, in fact, your partner. They will often work with you if you are upfront about what issues you are facing.
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As we talked about, full coverage auto insurance can be very pricey. It shouldn't cost you an arm and a leg to have your vehicle fully covered. Here at Cheapest Auto Insurance we are able to provide you with a quote for full coverage insurance that won't break the bank. Our representatives are ready to help you get full covered today! Call us today at 918-744-5145 or get a quote online here!