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3 Things About Auto Insurance Every Driver Should Know Before Purchasing A Policy

Auto insurance policies may seem awash in confusing jargon and small print, but it pays — literally and figuratively — to know policy basics before shopping around. If you don't, you risk ending up with coverage that is inadequate, overpriced, or both. Take a look below to learn more about some of the most important things every driver should know about auto insurance policies.

Premium Amounts Aren't Random 

The monthly or annual premium amount you see when you request a quote is far from random. Its based on a number of complex factors that algorithms use to determine perceived risk. Some of these factors are things you have little or no control over, such as where you live or how old you are. Other factors such as your credit score and driving record, however, are more subjective, and therefore may be evaluated differently by various insurance providers. As a result, a particularly safe driver may find the best deal with a provider that cares more about their history behind the wheel than their zip code.

Premiums and Deductibles Are Related

Although they refer to different things, premiums and deductibles are not totally separate. Choosing to pay a lower premium will naturally increase the deductible you owe in the event that something happens to your vehicle. Conversely, if you do not want the added hassle of spending a huge chunk of money after a collision or other incident, then you may want to increase your premium and lower your deductible. Careful drivers who drive in low-traffic areas may find it worthwhile to opt for lower premiums, while new drivers in urban areas may decide that a putting up a higher premium is the most cost effective option.

Even Comprehensive Auto Insurance Has Limits

In the context of auto insurance policies, the word "comprehensive" can be a bit confusing. The vast majority of comprehensive policies do in fact protect you from a wide range of damages caused by vandalism, fire, hail, and more. That said, collisions are not covered, and neither is the use of the vehicle for any kind of business. Don't assume that you can buy the cheapest comprehensive policy available and call it a day, as doing so can lead to a rude awakening later on. Carefully review exactly what an insurance provider's comprehensive policy covers, and then purchase additional collision coverage to get further protection in case of an accident.