How To Build A Vehicle Insurance Plan

If you're a driver, there's a good chance you'll need insurance for your car. When you talk with an agent about automobile insurance, they'll be able to offer many options. This can make the process of developing a vehicle insurance plan feel tough if you don't know what choices will work best for you, though. It will be easier, however, if you understand these four aspects of how to build a plan.

Premiums and Deductibles

These are the two fundamental numbers in any insurance arrangement. A driver pays premiums to the insurer to cover the costs of the plan. If the driver ends up in an accident, the insurance company agrees to only pay a portion of the expenses above the deductible level. Suppose you were in an accident that caused $2,000 damage to your car while your deductible was $500. The insurance company would pay $1,500, and you'd be on the hook for the deductible.

Caps

Many insurance policies also have caps that represent the maximum the company will pay for a particular type of damage. For example, there might be a personal injury cap of $35,000 for passengers in your car. The insurer would pay medical bills up to the amount, usually on a per-person basis. Usually, more coverage and higher caps come with higher premiums.

Collision and Comprehensive Coverage

There are also two kinds of coverage available. Collision only covers damage involved in accidents, while comprehensive covers other events, such as a tree falling on your car during a storm.

Generally, a collision-only policy has a cheaper premium. However, it also covers fewer scenarios. Comprehensive coverage is a good idea if there are many risks in your area. For example, rural drivers often carry comprehensive coverage because they're worried about hitting a deer.

Exposure

Ultimately, your decision about the amount of insurance for your vehicle will depend on your risk exposure. If you only have one vehicle and can't afford to replace it right now even with an auto loan, you will probably want to carry a fairly heavy policy. Similarly, a person who doesn't have tons of cash at any given moment may want to carry a lower deductible.

Remember, insurance is about protecting yourself against unexpected risks that might suddenly appear. If you have several vehicles, for example, there's probably less risk in a low-coverage policy on the one you don't drive as much. Conversely, someone who commutes 50 miles a day might want more third-party coverage because of their heightened accident risk.

For more information about building a vehicle insurance plan, contact a local insurance provider.

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