Almost every state has laws stating that people have auto insurance, but the actual regulations regarding auto insurance vary from state to state - so the type of coverage that you require depends on the state in which you live in.

Even if there are no laws, it is highly recommended that you have some form of cover; otherwise you may end up paying out huge amounts of money in the event of an accident, or even losing your home, in a worst-case scenario.

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Can Your Deductible Affect Insurance Discounts?

Deductibles are an integral and often misunderstood part of buying an insurance policy. It may seem negative, but the reality is that insurance is purchased hoping it will not be needed, but expecting something to happen. This is the most practical way to examine which deductible is right for you.

The deductible determines how much per incident you will have to pay out of pocket before the insurance kicks in. Auto insurance deductibles in USA are different from health insurance deductibles. Health insurance deductibles are annual in nature and once they are satisfied your out of pocket expenses (except for co-pays and prescriptions) are covered for the rest of the calendar year come what may. Auto insurance deductibles are based on one deductible per incident. If you are rear ended in March and then you hit someone in June, based on a $250.00 deductible you will have spent $500.00 or $250.00 per accident.

The good news about deductibles is that the more you are willing to pay out of pocket per incident the less the insurance has to come up with, therefore the insurance company will reward you will lower monthly premiums.

Most companies offer deductibles starting at $250.00, there are a few companies that offer a $100.00 deductible but expect to pay high monthly premiums. The average deductible is $500.00 and the higher ones are $1000.00 and sometimes $2000.00. If you are financing a car you will have to check with the finance company or bank to see what they require. Many institutions require a $500.00 deductible. The reason for the requirement is so that the premiums will be manageable as will the deductible so they have a better chance of getting consistent payments on your car whether or not it is drivable.

Deductibles need to be carefully considered because accidents do happen and in most cases your deductible must be met before the insurance company will kick in any cash for repairs. In the event that the car is totaled or stolen the insurance company will minus the deductible before cutting you a check to settle for damages.

The best way to manage deductibles and discounts is to choose the highest deductible you can afford to pay and this will lower monthly premiums. To receive further discounts, try to avoid any incidents that result in a claim. After 1-3 years you will be eligible for a good driver discount depending on the company. In addition, pay as much of the premium as you can up front. Paying your premiums quarterly, semi-annually, or annually will garner steep discounts.

Car Insurance Q & A

Question: If someone borrows my car and crashes it, does my insurance apply, or does theirs?
Answer: Generally speaking, the liability follows the car, so your insurance would apply, as it is your car. The liability insurance of the driver often pays the additional amount if the costs payable are above your policy limits.

Question: If a child goes to college with mom or dad’s car, are they covered under the parents’ personal auto policy?
Answer: This can vary from company to company. Check with the insurance provider and make sure that the child is listed as an additional driver. Do this before the child goes to college, and it will avoid unnecessary disputes later on.

Question: Do I need ‘gap’ insurance?
Answer: If your vehicle is on finance, and its value is now less than the amount you owe, then yes you need gap insurance. If you owe less than its value, then no, you do not need gap insurance.