Car Insurance Explained

Choosing the right coverage for your vehicle

Congratulations, you’ve found the vehicle that best suits you and your family! Now, it’s time to look into insurance. Before purchasing coverage, it’s important to understand all the components and types when choosing the right package.

In this blog, we will explain why car insurance is so important, the components of an auto insurance policy, common types of insurance coverage and factors that could affect your insurance premium

What is Car Insurance?

Car insurance is mandatory protection you must purchase to protect you from the financial loss of any potential accidents. For example, having car insurance can help protect you if you're held responsible for an accident that causes damage to another person or their car.

When a contract is made between you and the insurance company, you’ll be responsible for paying a premium to keep your insurance policy active should anything happen to you and your car.

Learn more about car insurance

Components of an Auto Insurance Policy

Premium: Your insurance premium is the amount you agree to pay for the coverage detailed in your policy, which is usually the same amount as the quote you received, with payments set monthly, quarterly, or semi-annually.

Deductible: An auto insurance deductible is what you pay “out of pocket” on a claim before your insurance covers the rest. Collision, comprehensive, uninsured motorist, and personal injury protection coverages all typically have a car insurance deductible. You usually have a choice between a low and high deductible. A low deductible means a higher insurance rate, whereas a high deductible means a lower insurance rate.

Coverage amounts: How much your insurance will pay out per accident or claim.

Common Types of Insurance Coverage        

  1. Liability Insurance - liability insurance covers you if you are in a covered car accident and it is determined that the accident is a result of your actions. Liability insurance will cover the cost of repairing any property damaged by an accident and the medical bills from resulting injuries
  2. Collision Insurance - if there is a covered accident, collision coverage will pay for the repairs to your car. If your vehicle is totalled (where the cost to repair exceeds the value of the vehicle) in an accident, collision coverage will pay the value of your car.
  3. Comprehensive Coverage – covers situations unrelated to a covered accident (i.e. weather damage, car theft, hitting an animal). Comprehensive coverage is one of those things that is great to have if it fits into your budget.
  4. Personal Injury Protection - the costs associated with an accident can quickly add up, and to cover those costs, Personal Injury Protection is available. With this coverage, your medical bills and those of your passengers will be paid, no matter who is at fault for an accident.
  5. Uninsured Motorist Protection - protects you in the event of a crash involving another driver who doesn’t have insurance. Whether the other driver’s insurance lapsed, was cancelled for nonpayment or some other reason, or they just never bought insurance in the first place, this coverage makes sure you won’t be left empty-handed after an incident.

Factors that Could Affect Your Insurance Premium

How Stuff Works points out that numerous factors can influence your potential car insurance rates. It would be best to familiarize yourself with these factors to understand better how your premiums are calculated. Some of the most important factors include:

  • The type of vehicle you drive. Some vehicles cost more to repair, are higher theft risk, etc.
  • How many miles you put on your vehicle each year. If you commute further, your premiums could rise because you have a greater risk of an accident.
  • How clean your driving record is.
  • Where you live, suppose you live in a densely populated area; theft and vandalism increase.
  • Your age. Drivers under 25 or older than 65 typically pay higher rates for insurance.
  • The length of your credit history. Younger people have shorter credit histories and typically pay more in premiums.
  • Your marital status. Married people often pay a lower premium amount because they are lower risk but also typically have multiple policies with the company.
  • The coverages and deductibles you choose.
  • The number of prior claims.
  • Your insurance history. Any gaps in coverage will cause your premiums to increase.
  • The primary purpose you use your vehicle for. If you drive your vehicle for business, you will need higher coverage. You will likely need a separate policy if you go for rideshare companies.

If you have any questions or want to get started with a free, no-obligation quote, we are Happy to Help! Our in-house Insurance team provides top-of-the-line comprehensive insurance in Alberta. Contact us today!