This article aims to provide you with an insight of the mechanisms behind car insurance. The technical fine points of car insurance and the interaction of the players of this game of numbers and chance are not well known by most. This is a chance to understand not only the what but the why behind our auto insurance.

Have you ever tried to explain somebody how to play a game they have no understanding of. For you the game is as simple as can be, even toddlers understand it, you might say. However, remember that toddlers also speak Chinese and read Sanskrit, skills not of all of us have. I recently was explained, or rather I should say, someone tried to explain to me the rules of American football. It was amusing to see my friend trying to explain concisely the rules of such a complex game. I still don’t understand the game completely so I will stick with Football (as in the original Football) when illustrating this point.

How do you start explaining the game? You might start by explaining the objective of the game. In the case of Football the objective is to introduce a round ball in the “goal” or net of the opposing team.

The Objective

The objective of car insurance is to provide financial protection from any damages, legal and medical liabilities that are a result of an accident or the use of your vehicle. In the case of the insurance company the objective is to make as much as a profit while keeping the clients sufficiently happy to continue paying their premiums.

Another important factor in Football is the role each player has. There are defender, midfielders, forwards, wings and so on. A major player is the goalkeeper. He is the only player that may touch the ball with the hands.

The players.

In car insurance there are various players each with their own agenda.

The broker: he wants the commission from your insurance policy. He will bend backwards to keep you happy and continue receiving the commission from your insurance renewal.

Then there is the car insurance company that has to balance the premium price to provide a profit to the company and keep you as a customer. The desire of attaining new customers might motivate the car insurance company to lower the premium of your car insurance.

You are the real player of the game, you are able to choose from a whole cohort of car insurance companies, ask for quotes and get the best deal there is to get.

Lawyers are interesting players in this game. They get paid by both sides and make a killing whoever wins. Such is the case that some car insurance companies have tried to arrange for no fault car insurance policies. These policies are cheaper and faster in paying for claims. The only catch for you and me is that we agree not to go to court, avoiding the lawyer fees and other expenses for both sides.

Getting the right car insurance for yourself is a little like finding a good wife or husband. There is not only one good option, but there are certainly a lot of bad options. Knowing what options will work and which won’t  is the secret to successful car insurance. However, even though it might look simple getting the right insurance for yourself is far from simple. The ideas and principles are not complicated, but you will need to spend some time in order to get the right results. How you can go about this is what the rest of this article will discuss.

Steps to car insurance success.

The first step to car insurance success is to spend some minutes deciding what is more important for you in your car insurance. Car insurances cover three main aspects of the risk involved in driving a vehicle. 1) Damages to the car, 2) Medical expenses of you and your passengers and 3) any damages caused to others and to other people’s property. Admittedly this is a rather simplistic approach to car insurance. But simplistic briefs on a subject can help to point out the main issues that need to be dealt with. These are the lines you need to be thinking: I have a brand new car that cost me more than twice my yearly wage before tax, I cannot afford to lose that car. I must therefore protect it with a good damages cover in case of accidents, theft and any other conceivable unfortunate happening. However if you own an old banger that is not worth much, say anything up to 2,000$ then it might be a good idea to save on the damages cover and invest more strongly in third party coverage and medical damages. Again if you have good medical insurance you could save further on any cover provided by another insurance. No situation is identical so although we can help you think along the right lines only you can understand you situation fully.

Once you have decided what it is that you need, you need to get the best price you can for it. The best way to make that happen is to quote till you drop. Online auto quotes are very similar to the typical application you fill in at Insurance brokers. The only difference is that with online quotes you just do it once and apply to dozens of insurance companies attaining much better prices.

A final tip in reducing your premium without losing your coverage is to apply deductibles to your car insurance coverage. For example if you have damages coverage why not place a 500 dollar deductible on your car insurance policy. This will mean that the first 500 $ of every claim will have to come from the customer with the deductible.

In a nutshell.

Only you can get the best deal on your car insurance. Decide what you need for your car insurance, get deductibles to reduce your premium and finally send out quotes until you get the deal you want.

One of my favorite teachers once told me. The most intelligent or successful people are not those with all the answers but those that know where to find them. This is sound advice. It is impossible to know everything but it is more accessible to know where to find out about nearly everything.

This concept applies to scholarly subjects and more everyday subjects like buying a house, getting a car loan and finding car insurance online. Car insurance is a realm of everyday practical knowledge that most of us have ignored to our own peril, or more accurately in this case, to our own financial loss.

The best kind of customers for car insurance companies are customers that don’t understand what they are buying and who are willing and able to pay the premiums. Not surprisingly, this is good for the insurance companies, not so good for you and me.

If you own a car, make this commitment with yourself. A commitment to have a better understanding of your car insurance and to save money on your car insurance policy.

How can you improve your understanding of car insurance? This is the main question as an understanding of car insurance basics will lead you to getting a deal on your car insurance.

How you learn about car insurance will largely depend on the type of learner you are. Some require formal methods like textbooks and university courses. These are valid methods to learn about car insurance and the insurance industry. However I would recommend a more direct way. Articles like the ones on this blog and other sites provide practical methods, how-to guides that tackle the issue of how to do things in a more practical fashion. The difference in method is comparable to the two avenues a man had to join the British Navy. One could join as a child and learn the ropes from bottom to top while getting an education or one could go to colleges and join the Navy at a later age. Both methods formed good sailors but of a different type.

Another type of learning center is the open source knowledge centers that have appeared on the Internet. Most of them are of excellent quality and are a testimony to how much good the Internet can do when the right motivations and feelings are touched. Websites like Wikipedia. The best option is a combination of theoretic and practical knowledge.

Here a few pointers that will help in your search for good value car insurance.

1) Use deductibles wisely. Deductibles are an agreement the client makes to pay first xxx$ of a claim. This reduces the risk of the car insurer allowing the premium to be dropped. If you take on high deductibles for coverage types you will not need or that are not a priority for you, you can save plenty on your premium.

2) Make sure your driving is safe,  pay your fines or even better avoid them altogether.

3) Choose cars that are not too fast, too powerful or considered popular in risk groups like young male drivers.

These are just a few of the practical steps you can take to save money on your car insurance!

The unknown has always being a great promoter of myths and creative thinking. Car insurance is an industry that although it affects us all is little understood. Just like lightning bolts falling from the sky was the catalyst for all kind of gods and myths, understanding how insurance premiums and coverage works has also created all kinds of misconceptions and strange ideas. As with myths the best way to fight misunderstandings is with knowledge, with education.

The problem with myths and misunderstandings is that we get emotionally attached to them. In one Central American country the vast majority of the population feels it is dangerous to open your fridge after ironing. The contrast in heat and could cause you to have a stroke. The same goes for having a cold shower after you get all sweaty, mortally dangerous. For most of us that seems strange and unless we had extremely solid proof we would dismiss it as superstition. However if you really felt it was true you would need evidence that it is actually a mistaken idea.

This article will attempt to do that with car insurance misconceptions. Here it goes:

1) You don’t really need car insurance. Many believe that car insurance is just another annoyance imposed by the government to get you to spend money. And although it is true that having basic third party insurance is a legal requirement for all those that own a car there is sound reasoning for you to have car insurance for your own good. We live in a society that holds you responsible (at least in principle) for the damages you cause. Cars are dangerous, they can cause all kinds of injuries to you, your passengers and others. Having insurance protects you from the financial consequences of an accident. Even the smallest accident can cost thousands of dollars that would fleece most of us from our cash savings.

2) All insurance policies are pretty much the same. Big mistake. It is like saying that all cars are the same. It doesn’t matter how kind you are you are not going to say a Lada is just as good as a Bentley. The same goes for car insurance you can get the basic, bread and butter insurance that will just save you from a fine or you can get 100% first party insurance that shields from nearly all conceivable accidents and damages. The cost of course will reflect the kind of coverage and the car that is being insured as well as the type of driver you are.

3) Your credit score doesn’t matter. This might seem to be true. What does your credit rating have to do with your car insurance premium. Car insurance companies think different. Statistical analysis seems to have proven that drivers with good credit rating are less likely to be involved in a car accident and are therefore less of a risk for car insurance companies.

These are only three of the many misconceptions in car insurance. Help yourself by reading and learning more about car insurance and how you can save money.

When we buy something we like to know what we are paying for. If a large coffee is twice as expensive as a medium you want to know what you are getting for twice the money. The same occurs when you buy a car. You expect the price to reflect factors like the age, engine size, brand, and similar variables that increase or decrease the value of the vehicle.

When searching for the right car we don’t simply ask for the cheapest car in the lot. We know that will probably get us a terrible deal that might not start the next morning.

Strangely enough we don’t seem to act the same way with car insurance. We either ignore it, pay too much or too little without spending enough time on understanding and working with our car insurance.

Understanding what makes up our premium, the cost of our insurance will help us decide what we need and what we don’t in our car insurance. This will help you save money now on your premium and potentially save you from financial ruin if you get the right insurance coverage and protect your interests.

What makes up your car insurance premium?

A car insurance premium is the monthly or yearly monetary value an insurance company places on your risk as a client. The risk you pose as a client depends on various factors.

1) What you are insured for. Getting insurance for a BMW or a Skoda does not come at the same price. Similarly, owning a family car is considered safer than owning a sports car. Some insurance companies will even price premiums based on the color and how “hot” the car is.

2) Your personal risk rating. This refers to your driving history, your credit history, unpaid fines, age and gender. As is well known being a women will get you cheaper insurance. The older you are the cheaper your car insurance premium will be up to early 60’s when your premiums will slowly start to rise.

3) The pricing policy of your car insurance. Insurance companies don’t only rely on statistical rules, they also adapt to the rules of economy all business must follow. That is one of the reasons why it is such a good idea to shop around. If a company has had a bad year, and have lost a lot of money they might either increase their premiums to protect their end of year profit or lower premiums to attract more business.

4) What coverage you get on your car insurance. You choose to a great extent what deductibles or limits you place on your car insurance. If your liability insurance has a maximum of 25,000 dollars your premium will be low but you better start praying you don’t get into an accident where you are at fault, because 25,000 dollars is not likely to get you far.

Be smart! Think about what makes up your car insurance premium and find ways to improve it!

2) The risk factor

Taking insurance has surprising similarities with gambling. Why do I say this? For various reasons.

You might not “win”

Just like in gambling or games of chance you might not win, or as in most cases you are unlikely to win so is the case with insurance policies. You are unlikely to need them. It can therefore be tempting to not spend something on something you might not use. This has caused many to feel that insurance  is for pessimists and that it is better to make up your own insurance. So is it worth buying insurance? Many would say yes as the potential problems outweigh the expense of insurance by a large margin.

The higher the prize the more expensive the ticket.

Just as you don’t pay the same for the ticket of a million dollar prize than that of a bicycle in a supermarket you don’t pay the same by ensuring every piece of the service.

So what are the pros and cons of car insurance for rental cars?

The pros are easy to explain. Car insurance for rental cars can go a far way in protecting you from the eventualities of your travelling and local car use. However it might seem as a waste of money as you may never use it and the price of insurance often is larger than the actual car rental fee. The truth is that many times car insurance is a wasted expense as drivers are often covered by their own car insurances and insurances included in their credit cards. These insurances, especially the credit card insurance are classed as secondary insurances in the sense that they only become operational when the main insurance does not cover.

Some types of car insurance extras are rather useful and can be a good idea to purchase if you can. These are Collision damage waiver and liability insurance. Collision damage waiver protects you from car accidents and the damage to the car by waiving the deductible included in the insurance. Liability insurnace covers the responsibility you owe to others who are suing you for damages.

So what can you do to balance the pros and cons of car rental insurance. The best way forward is to contact your insurance company and speak to your broker before you go on a holiday. Ask him what your questions are and what you need from your insurance. They will clarify what is included and what is not with your other insurance details.

The best balance seems to be again the golden mean. Some insurance, at least the legal minimum is required to make a success out of your holiday. However if you spend too much your house becomes a forest and you must get more time to fix the car you are about to sell.

Be smart and make the right choices for car rental insurance. Make sure you understand all the ins and outs of the contract and thank the director if you happen to hear his name.

You have heard about budget friendly vehicles and environmentally friendly vehicles. Have you heard about car insurance friendly cars?

Your first reaction might be: “What do I care if my insurance likes my car or not?”. The answer of course is, you should care a lot, unless you are a millionaire and then you are not likely to be reading this article. First things first, what do we mean by car insurance friendly cars?

Car insurance friendly cars are cars that car insurance like to insure. They are more desirable for car insurance for a variety of reasons. For instance they might be cheaper to repair or the price of the spares might be lower. Some vehicles also have lower rates of accidents, and that is something car insurance companies really appreciate. Vehicles can also be considered more dangerous by the size of the engine and the potential speed they can reach. Faster cars equate to more serious accidents if an accident occurs, which translates to more expensive claims for the insurance company. Finally some cars are associated with high risk groups that tend to have more accidents, like young men. Car insurance companies penalize these vehicles because these vehicles cost them more in claims and they want to incentive’s other vehicles while making the high risk vehicle owners pay for their larger slice of the insurance claim cake. Don’t you like paying more than others for the same service? Be smart choose car insurance friendly cars.

So how can I choose a Car Insurance friendly vehicle?

This article will details a number of practical sugestions to save money on your next car insurance.

1) Buy the right TYPE of car. Buy cars that do not have street racing characteristics like hyper tuned engines. Flashy sport cars and big 4×4’s, have negative connotations to do with the type of use their owners put them through. It does not mean you can’t get a nice car. In fact car insurance like new cars (less things to go wrong with them) with good safety features like ABS, side reinforcements, Airbags and so on.

2) Don’t go to popular. It is a good idea not to buy a car in the top ten most stolen cars in your country or state. National insurance crime bureau and other official organisms in other country provide lists of the top ten most stolen cars.

3) Go with cars that are cheaper to fix. Buying cars that are made in the country you live will bring down the price of spares. You should also choose houses that are built to last and that are designed to withstand bad treatment.

4) Go as inexpensive as you want. Expensive cars are most expensive to insure and insure companies prefer to limit them and might completely ignore them until they buy a new vehicle some time.

Buying cars that are car insurance friendly can save you a fortune and get you to become a pioneer that enjoyes theministry.

If it is the first time you get car insurance or you never spent any time researching  car insurance in the past this is your chance of getting a basic understanding of the facts and terminology of car insurance. Don’t worry about the dummies part of the title, as the popular line of self help books says, “it is a reference for the rest of us”. The fact is that few of us have spent the time necessary to research all the terms that control car insurance. Some of these terms are quite specialised and belong in the legal profession which explains why so few of us understand them.

How does the Car Insurance industry work?

Let’s start by explaining what makes the wheels of the car industry spin. How is business kept in motion and how is profit made? Well, it is important to understand that Car Insurance like all insurance provides protection from the possibility of something occurring to your property, to you or your family and dependents. In the case of car industry the insurance protects you from the financial consequences of your car being stolen or damaged and the physical injuries it causes on you and the passengers in the car. Because the Car Insurance company is not actually selling you something tangible, just the promise of cash if things go badly in the future, many don’t understand the way that premiums are worked out and how to tell a good insurance apart from a bad one.

Liability insurance

This is the most important type of car insurance. It is so important it is obligatory in most countries or states. Liability insurance protects you from the financial responsibility when you damage another car, cause injuries (or even death) to others. You must check that your liability insurance is at least as high as the minimum of your country or state. A good rule of thumb is to at least have 25,000 /50,000 dollars in liability insurance. This means that the insurance company will provide up to 25,000 for a single person and up to 50,000 when there are multiple victims.

Property damage or liability insurance

This insurance will pay for any property damages you cause if you are in the wrong in an accident. This protects against damages to other cars, public and private property. You can fix your property damage liability insurance as high as you want, although this will affect your premiums.

Comprehensive insurance

This type of insurance provides financial protection when your own car is damaged by vandalism, bad weather, etc… or when it is stolen. This type of insurance can really pump up the price of your premium. You can control the cost increase by adding deductibles to this (and any other) insurance types.

Deductibles are a feature in car insurance where you cover the first xyz amount on a potential claim. For example if you have a 1,000 dollar deductible you will pay the first 1,000 dollars on any claim on the insurance the deductible applies to.

The question of how much you should pay for insurance, or for the premium of an insurance policy is like one of those bad philosophical ‘unanswerable’ questions like: Does a tree falling in a forest where nobody can hear it make noise? How what is the sound of a one handed clap? Or the classic ‘How many angels can you fit on the head of a pin? In other words it is hard to say. Like many of the questions we offered as illustration many could not car less for their insurance details. They view it as a necessary evil and not worth the time to fuss over.

Of course unless you are seriously wealthy (and even then it would silly) you should not ignore the issue of insurance. But calculating how much you should pay is a surprisingly difficult question to answer. The main reason for this is that insurance is not a tangible asset or good. You can work out the price per kilogram of each brand of a certain product. You can’t always determine qualitatively the price/value relationship of a certain policy. Let me illustrate, when buying a dishwasher soap at your local store you might take various factors into consideration, 1) The price, 2) The quality of the product, how well it cleans, 3) The impact on the environment and any other number of issues you care about in the soap department.  However with car insurance it is by no means so straightforward.

The main reason for that is that insurance may not be used, covers such a large set of potential circumstances it can never be comprehensive for every situation. Insurance companies try to put a price (the premium) on the possibility of  maybe having to  cover some unknown expenses incurred to some unknown random accidents. Would you like to put pen to paper and calculate that? Let me warn you it is not difficult. Even the best cost estimators and risk assessors need to allow for huge error margins.

All of this waffle means one thing to you, you are going to have to do your own research. Calculate what you need to insure, how much it is worth and what deductibles can you afford to place on the insurance. Then get this data and send it to at least five insurance companies. It is a good idea to spread the companies you send your request to along the car insurance spectrum. Then check the prices and go for the best price/quality ration. It is hard to tell the quality of a car insurance company until you actually need their help. This uncertainty can be curbed by checking past history with other clients, searching for past cases and the report the company receives. This way you will have a good idea of the going rate and will be able to shop accordingly.

As you can see how much premium you should pay depends on who you are, what you want to insure and much it costs.

Asking if low cost insurance companies are good is like asking if cheap airlines are good. Some might answer without a thought, No, they are rubbish. Others have a cult like attraction to some of the low cost companies that have started operating in the last years. The answer as you probably expected is boringly non-committal, it depends. Just like the quality of a low cost airlines depends on their safety record, maintenance policy, staff training and many more factors that are not necessarily divorced from offering a lower price.

However it does become suspect when companies can offer the same or better at a lower price. They either have geniuses for managers that are using a secret method, are willing to work on a narrower profit margin or you are being ripped off (i.e. being cheated) or will be ripped off when you actually need to claim a policy.

The truth is that Car insurance is as much a science as an art. There are all kinds of mathematical models and equations that attempt to calculate risk and variables clients possess. For instance, an insurance company will be interested in calculating how much more expensive it is to provide insurance for a man than for a woman, a twenty year old or a forty year old. Their calculations will affect the prices of the premiums for the policy holders, how accurate the models are will define the success of the company. The point of this paragraph is that there is room for variety in car insurance, a company can be cheaper because they have a better (or worse) grasp of the prices and costs of a particular insurance.

A useful comparison is a construction company. Construction companies must provide the client with a quote for the work they are asked to price. Before they give a quote they must think about how much they will have to invest to get the job done. In order to do this they will have to have a good grasp of the cost of things, from the price of a nail to the wage of a joiner. The more accurate the costs estimate the better the price and the more chances the company has to prosper. If the company’s price is too low it will lose money, if it is too high they will probably not get many jobs as they will be outbid by the competition.

It works similarly for insurance companies. If they try and cut down on the trimmings and spend smartly they will be able to save a few pennies, as low cost airlines do by not offering movies or a decent meal. However the final factor in determining if they will be successful as a company and as an insurance provider is their ability of getting a feel of the market, the cost and risk of insuring a policy holder.

So what can we say about our original question. I’m afraid it’s still, it depends.