Last Updated: 27th October, 2020
Inexpensive Car Insurance
This article provides in-depth information on various Types of Car Insurance Coverage, (mostly applicable for drivers living in the US), how to Save on Insurance effectively and Temporary Car Insurance in Canada.
Types of Coverage
Your auto policy is broken down into different coverage types. The types are fairly standard company to company and across different states. There is some variation in exclusions and definitions between insurance companies. In addition, different states have different minimum requirements as well as some different coverage options and requirements.
- Collision: This is what most people think of when they picture car insurance. It covers damage to your car resulting from an accident (with another car or stationary object). Collision is usually required when you have a car loan. When you don’t have a loan, collision is usually an optional coverage. If you are driving a beater it may not be worth the money to insure, especially if you have an emergency fund to cover a new car in case of an accident. Deciding whether to drop collision is a personal decision. It is recommend talking to an agent. They can break down your quote and tell you what it costs to keep collision on your vehicle. This will help you decide if it’s worth it.
- Comprehensive (Comp): Comp is similar to collision but this covers damage to your car caused by an ‘act of god’ (wind, hail, falling trees, deer, cracked windshield, etc.) Everything else said for collision applies here. However, note that you can have separate deductibles for comp and collision. Many people like having a lower comp deductible to cover the less severe cosmetic damage (hail, glass).
- Property Damage Liability or Physical Damage (PDL or PD): If you’re deemed at fault in an accident, this covers the damage to the other car(s) and / or building / property you damage. This is a required coverage with the required limits varying state to state. I’d highly recommend getting at least $25,000 limits (if not more) even if your state requirements are lower. If the damage you cause exceeds your limits you will be legally obligated to pay the difference out of pocket.
- Bodily Injury Liability (BI): This is similar to Property Damage Liability but it covers the person you injure, not the car. BI pays for medical bills, pain and suffering, wage loss, and funeral service. It is primarily used for people in the car you hit but also covers pedestrians you hit and any passengers in your car. However, note that this coverage does not cover you (the at fault driver). The limits with this coverage get a little more complex. There are two limits. Per person and per occurrence. A common example would be 50/100. This means it will cover up to $100,000 for any given accident but each person is limited to $50,000. Like Property Damage Liability, you could be held liable for additional damages if your limits are insufficient. A minimum of 100/300 is recommended.
- Medical Expense / Medical Payments (Med Pay): This covers your (and your passengers’) medical bills. It is a no fault coverage so it applies regardless of who caused the accident. This is a great coverage, especially if you have no / limited health insurance. Even if you have health insurance this is nice because there are no deductibles / copays. In some PIP states (see below) med pay is not available.
- Personal Injury Protection (PIP): This varies greatly from state to state and is not offered in some states yet required in other states. Like med pay, it’s a no fault coverage. It will cover your medical bills regardless of who is at fault. However, unlike med pay, there is sometimes a threshold; you must reach a certain amount of medical bills before this coverage kicks in. Another difference is that PIP also covers additional expenses such as wage loss.
- Uninsured / Underinsured Motorist (UM/UIM): This is an additional coverage and varies from state to state. It basically covers accidents where you’re not at fault but the other person doesn’t have any / enough insurance. You may be thinking that earlier this page mentioned under BI/PD that if you’re at fault you can be held personally liable if your insurance limits aren’t sufficient. So why would you need this coverage? If the other party is at fault either their insurance would cover it or they would pay out of pocket. But what if it’s a hit and run? Or an unemployed bum? The chances of you ever seeing a penny is slim. This coverage protects you when the liable party is unable to pay. The PD portion covers damage to your car and the BI portion reimburses you for medical bills, pain and suffering, and lost wages. So now you’re probably thinking well I have health insurance plus I already have med pay so why would I need this? Simple. This offers further protection. If you’re in the hospital, unable to work, after the accident this will cover your lost wages. If you require in home care, this will cover it.
- Other: Depending on the carrier, there may be other optional coverages such as emergency road side assistance. These are highly variable so they will not be covered here.
Ways to save on insurance
Here are a few tips on how to save.
- Shop around. Talk to an agent. Get a quote online. There are dozens of factors that go into pricing and each company has a slightly different formula. Find the company whose formula works in your favor.
- Pay your bill upfront rather than monthly. Many companies give you a discount for paying right away rather than once a month. Additionally, if you’re able to use a rewards credit card to do this you could get additional cash back (just make sure to pay your statement in full to avoid paying interest).
- Adjust your deductibles. Sometimes this makes sense, sometimes it doesn’t. It really comes down to how the company prices and how comfortable you are with risk. For example, if some cases, increasing the deductible from $500 to $1,000 would have only saved the driver $8 every 6 months or $1.33/month. In order for this to work out in that person’s favor, they would have to go 375 months without an accident. In this situation it wouldn’t be worth the extra risk and kept the lower deductible. However, if you feel you’re a safe driver and are unlikely to get in an accident, and also have an emergency fund big enough to cover a large deductible, go ahead and increase your deductible and save a few dollars.
- Bundle. Try to get your homeowners / renters through the same company. Most places offer a large discount when you bundle. If you have children / dependents it could also be worth looking into term life as well.
- See if you can get a discount for taking a defensive driving course. Just make sure the discount would offset the cost to complete the course.
- Get Usage Based Insurance (UBI), especially if you do not drive a lot. Many companies offer a discount for installing a device in your car that monitors your driving habits for a few months. On top of the discount offered for installing the device, most companies will then lower your premium further if you have safe driving results.
TEMPORARY CAR INSURANCE IN CANADA
Car insurance is required to legally drive a car, and it protects a driver from the risks associated with driving. However, car insurance plans frequently require a driver to sign up for a long term commitment with it being difficult for drivers to find an insurance plan on a short term basis.
Temporary Insurance: What Is It?
Drivers can solve the problem of getting temporary coverage by purchasing a temporary insurance plan. Generally, a temporary insurance plan is for less than a few months with some plans covering a driver for a couple of weeks. A typical temporary insurance plan will cover the driver from between one day to a month.
Temporary car insurance policies have a number of advantages. They are generally cheaper than other car insurance plans that may require a driver to sign up for a committed term of payments. However, most temporary insurance plans will be more expensive on a day to day basis than a long term plan. They are also much easier for to secure. Most temporary plans simply require the car owner to place a phone call. The temporary car insurance can then be added to a car almost immediately.
WHY MIGHT YOU NEED TEMPORARY CAR COVERAGE?
There is a variety of reasons why you may need temporary insurance. The most common reason is that you are the owner of a car that you only drive during certain parts of a year. This may be a car used for road trips, moving furniture, hauling a trailer, or a classic car that you rarely drive. This allows you to save money on insuring these cars while allowing them to be covered during the time they are in use.
It is common to get temporary insurance for people who do not drive the car that often. This may be a student who is home from school and needs to drive the car, house guests or house sitters that need a way to get around, and for people who suddenly find a need to drive.
Temporary insurance can be used to maintain coverage between when you first buy a car and are waiting to decide on a permanent car insurance plan. This allows you to secure the best policy possible. Temporary insurance is useful if you are too busy to pick out the best permanent car insurance policy. Similarly, temporary insurance can be used to maintain coverage when switching policies.
Also, temporary insurance is useful when selling a car. It allows you to avoid having to pay insurance on a car that is already sold while still maintaining coverage during the sales process. This means that a driver doesn’t have to rush to sell a car that has had its permanent insurance plan canceled.
HOW TO GET TEMPORARY OR SHORT TERM CAR INSURANCE
The first step in purchasing temporary insurance is to make a list of companies that offer this type of insurance, you can begin a quote with us today to see a complete list of temporary insurance providers. All we need is your basic information, this will include sthings like has how long of coverage is needed, the amount it needs to cover, and your driving history.
You will then have to decide on how long of coverage you will need, what level of liability coverage, and if you want additional coverage such as collision or total insurance coverage.
Temporary insurance may present you with the decision to purchase a relatively longer policy for a lower rate, or a short term policy that may not cover the full amount of time that you need insurance for. It is good to compare the rates between policies with different lengths of coverage.
The final process of securing temporary insurance is fairly easy. Most policies can be secured over the phone. This is especially true when securing coverage for a temporary driver on an existing policy. Other companies allow insurers to purchase policies over the internet.
It is important to review the policy for things such as cancellation or renewal fees.